Good day, ladies and gentlemen, and welcome to Northrop Grumman's fourth quarter year-end 2021 conference call. Today's call is being recorded. My name is Natalia and I will be your operator today. At this time, all participants are in a listen-only mode. If at any time during the call you require assistance, please press star zero and an operator will be happy to assist you. I would now like to turn the call over to your host, Mr. Todd Ernst, Treasurer and Vice President, Investor Relations. Mr. Ernst, please proceed. Thank you, Natalia, and good morning, everyone, and welcome to Northrop Grumman's fourth quarter 2021 conference call. We'll refer this morning to a PowerPoint presentation that is posted on our IR webpage. Before we start, just like to go through a couple comments here. The matters discussed on today's call, including 2022 guidance and beyond, including our outlooks, 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, which are 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. On today's call are Kathy Warden, our Chairman, CEO, and President, and Dave Keffer, our CFO. At this time, I'd like to turn the call over to Kathy. Kathy? Thank you, Todd. Good morning, everyone, and thank you for joining us. We delivered another year of solid operating performance in 2021 and positioned our business for continued growth in 2022. We are executing our strategy, which is to grow the business today and into the future, maintain excellent performance and reduce costs to deliver strong margin rates, and deploy our capital to create value. We made significant progress in executing this strategy again in 2021. Our organic sales growth for the year was 3%. Our segment operating margin was an exceptionally strong 11.8%, which increased 40 basis points compared to 2020, with performance more than offsetting mix and COVID-related headwinds. We grew our transaction-adjusted EPS by 8% and generated $3.1 billion of transaction-adjusted free cash flow. Regarding capital deployment, we returned a record $4.7 billion to shareholders through dividends and share repurchases, including a $500 million accelerated share repurchase that we announced in November 2021. We strengthened our balance sheet, retiring over $2.2 billion of debt during the year and achieving an increased credit rating in the process. We continued to invest in our business with over $1.4 billion in capital expenditures to create new technologies and support franchise programs. We also continued to add to our portfolio of franchise programs with competitive wins on programs like the Integrated Battle Command System, or IBCS, as well as Hypersonic and Ballistic Tracking Space Sensor and Next Generation Interceptor. As we look forward to 2022 and beyond, we expect our organic growth will continue as we win new business and convert the robust backlog we've built over the past several years into sales growth. While we'll know more about the President's budget request in the coming weeks, we continue to believe that our portfolio is strongly aligned with the threat environment and the key investment priorities of our customers. Further, we expect strong margin performance as well as double-digit free cash flow growth from 2022 through 2024. 2022 guidance reflects our confidence in our strategy, our broad portfolio, and our ability to deliver continued growth and strong performance. As reported, the COVID pandemic continued to present challenges to labor availability, parts supply, and shipping delays across the economy, particularly in the second half of last year. We have felt these effects and the challenges of both our supply chain and our own labor availability. We will continue to take proactive steps to address such COVID risks, both to our employees and our business. Looking forward, our current guidance reflect the factors we know today and our best estimates for the remainder of the year. Dave's gonna provide more details on the quarter, the full year, and our guidance in just a few minutes. Turning now to the budget environment, the federal government continues to operate under a continuing resolution that currently runs through February eighteenth. Negotiations on the fiscal year 2022 appropriations bills are continuing, and we remain optimistic that Congress will reach an agreement by the end of the first quarter. The National Defense Authorization Act contained a $25 billion increase to the defense budget that represents 5% growth compared to fiscal year 2021, which we expect to also be supported in the appropriations bill. In the NDAA, there is continued support for our major programs, and several of our programs received incremental funding above the President's budget request, including Triton, E-2D, F-35, F/A-18, and G/ATOR, among others. Finally, we expect the FY 2023 President's Budget to be delivered to Congress in March of this year, reflecting this administration's priorities in areas such as Mission Systems, Space Systems, missile defense, advanced weapons, and deterrence. Focusing now on highlights in the quarter, one of our proudest moments was the launch of the James Webb Space Telescope on December 25. Northrop Grumman is the prime contractor for NASA on Webb, and we're honored to have partnered with NASA to provide the world with its revolutionary technology. Webb will peer more than 13.5 billion years into the past when the first stars and galaxies were formed, ushering in an exciting new era of space observation and expanding our understanding of the universe. In addition to Webb, we're also supporting NASA's Artemis mission by producing the largest solid rocket motors ever built for the Space Launch System, which is being developed to send the first woman and next man to the moon. In the fourth quarter, the Space Systems sector received a $3.2 billion award to support Artemis missions four through eight. Another important milestone in the quarter was the competitively awarded IBCS in our Defense Systems sector. This program is a centerpiece of the U.S. Army's modernization strategy for air and missile defense and all domain command and control. It's a prime example of our capabilities to integrate assets in the battle space, regardless of source, service, or domain. This is one of many examples of how we are helping our customers share data between systems and improve command and control in support of their JADC2 vision. In the area of missile defense, we had several milestones in the quarter which position us to help our customers track and defend against hypersonic and ballistic missile threats. In the fourth quarter, we announced that HBTSS had passed its critical design review. These satellites are planned to be part of a multi-layered network of spacecraft that will detect and track hypersonic missiles. Also in the quarter, we were selected by the Missile Defense Agency to design a Glide Phase Interceptor for regional hypersonic missile defense. In our Mission Systems sector, we continue to see our customers prioritizing development of capabilities that will increase the effectiveness and survivability of legacy systems, as well as new technologies for next-generation systems. In the fourth quarter, MS received an accelerated award for F-16 SABRs for approximately $200 million and full-year awards of approximately $700 million. We have now received total contract awards for nearly 1,000 radars for this program in support of the U.S. Air Force and National Guard, as well as several international customers. In addition, our network information systems business area within Mission Systems received approximately $1 billion in awards for advanced processing solutions. This portfolio delivers strategic microelectronics focused on high-performance computing and security, which helps our customers with connectivity and processing solutions. We anticipate additional awards in this segment of the portfolio for the next few years, and we expect it will be a significant growth driver for MS in 2022. Finally, in aeronautics, the military aircraft market is undergoing a transition as our customers focus their investment in next-generation programs while divesting some legacy platforms. As we've discussed, certain programs in our portfolio at Aeronautics Systems are maturing and experiencing headwinds, but there are also a number of exciting new opportunities that are emerging. This includes next-generation manned aircraft as well as new unmanned opportunities, which U.S. Air Force Secretary Kendall recently announced. In addition to pursuing these longer-term opportunities, we remain focused on executing our programs and delivering for our customers. Another important aspect of our company's future is our strategy for sustainability. We strongly believe that our environmental, social, and governance programs play an important role in sustainable, profitable growth and in long-term value creation for our shareholders, customers, and employees. Northrop Grumman is a leader in conservation activity, with a 44% reduction in greenhouse gas emissions since 2010. In the fourth quarter, S&P released its global corporate sustainability assessment scores, and we ranked in the 96th percentile. We were included on the Dow Jones Sustainability North America Index for the sixth consecutive year, and we were included in the Dow Jones Sustainability World Index for the first time. Our ESG strategy also includes portfolio management actions. As we've discussed on earnings calls last year, we committed to transition out of the small aging and surveillance contract that we had for cluster munitions, and that contract is complete. While we continue to be an ammunition supplier as both a prime and a merchant supplier, we have made the decision to transition our prime role in depleted uranium ammunition to another provider following one final single production year contract. We are currently working to establish our next set of sustainability goals and priorities, specifically as they relate to greenhouse gas emissions, water conservation, and solid waste diversion, with a stronger emphasis on renewable energy. Overall, we're making substantial progress in our ESG journey, and we look forward to sharing more in our upcoming sustainability and TCFD reports. With that, I'll turn it over to Dave to provide more detail on our sector results and guidance, and then I have a few additional comments before we move on to Q&A. Okay. Thanks, Kathy, and good morning, everyone. 2021 was another strong year of performance for the company. Before going through the details of our results and guidance, I'd like to note a few items to keep in mind when comparing Q4 to the same period last year. As we previewed in prior quarters, the divested IT services business, the equipment sale at AS, and four more working days in Q4 2020 represented over $1.6 billion of sales when compared to Q4 2021. With that said, sales per working day in 2021 were at their highest level in Q4. Moving to sector results, we continued to see certain COVID-related effects on our labor and supply chain in Q4, and these effects were most significant in our Aeronautics sector. The Q4 decline in AS sales was partially driven by fewer working days and the 2020 equipment sale, and it also included a $93 million unfavorable EAC adjustment on F-35. Turning to Defense Systems, sales declined in Q4 in 2021, primarily due to the IT services divestiture. Organic sales were down 9% in Q4 and 4% for the full year, driven by the completion of our contract at the Lake City Ammunition Plant, which generated almost $400 million of sales in 2020. Mission Systems organic sales were down 3% in the fourth quarter, primarily due to the reduction in working days, and up 6% for the full year. Higher 2021 sales were driven by increased volume on G/ATOR, GBSD, SABR, JCREW, and restricted programs, among others. Lastly, Space Systems Q4 and full year organic sales rose by 6% and 24%, respectively. We continued to ramp significantly on franchise programs, including a $1.1 billion dollar increase on GBSD in 2021. Growth was also driven by restricted space programs as well as NGI and Artemis. Moving to segment operating income and margin rate, AS operating margin rate decreased to 8.4% in the quarter and 9.7% for the full year due to the unfavorable EAC adjustment on F-35. In our other three sectors, segment operating margin rates met or exceeded the high ends of our prior 2021 guidance ranges. Defense Systems operating margin rate increased 90 basis points to 12.1% in the quarter and 80 basis points to 12% for the full year. Higher operating margin rate was largely due to improved performance as well as recent contract completions. At Mission Systems, operating income and rate grew in both periods. As a result of higher EAC adjustments and business mix changes, operating margin rate grew to 15.9% in the fourth quarter and 15.6% for the full year. At Space Systems, operating margin rate was 9.6% in the quarter and 10.6% for the full year. Favorable EAC adjustments from strong performance on commercial space programs helped offset mix pressures for the year. Keep in mind that Space, along with AS and MS, benefited from the pension-related overhead benefits that we recognized in the first quarter of 2021. At the total company level, segment operating margin rate in the fourth quarter was the same as Q4 2020, even with the F-35 charge in 2021, and it increased 40 basis points for the full year to 11.8%. Turning to EPS, our transaction-adjusted EPS declined 9% from Q4 2020 to Q4 2021, primarily due to lower sales volume from the factors I described earlier. For the full-year EPS, we exceeded the high end of the EPS guidance range we provided in October. Transaction-adjusted EPS grew 8% in 2021 due to strong segment performance and lower corporate unallocated costs. Lower corporate unallocated was driven by two items we've discussed in prior quarters: the $60 million benefit from an insurance settlement related to the former Orbital ATK business and lower state taxes. Regarding our pension plans, asset performance was strong again in 2021 at nearly 11%, the third year in a row of double-digit asset returns. Our FAS discount rate increased 30 basis points to 2.98%. These factors resulted in a mark-to-market benefit of roughly $2.4 billion in 2021. In addition, our net pension funding status has improved by over $3 billion and on a PBO basis is now over 93% funded. We continue to project minimal cash pension contributions over the next several years. Also summarized are our pension cost estimates for the years 2022 through 2024. CAS recoveries are projected to continue declining over the planning period. While this causes an EPS headwind, particularly in 2022, it makes our rates more competitive and our products more affordable. Our CAS prepayment credit is approximately $1.7 billion as of January 1 of this year. Now turning to cash, we generated nearly $3.6 billion of operating cash flow and $3.1 billion of transaction-adjusted free cash flow in 2021, in line with our expectations. In the fourth quarter, we made our final federal and state tax payments associated with the IT services divestiture of almost $200 million. We also made our first payment of roughly $200 million of deferred payroll taxes from the CARES Act legislation. The remaining payment of the same amount will occur this December. Looking ahead to 2022, our sector guidance is shown on slide nine. This outlook assumes that appropriation bills are passed by the end of Q1, and it assumes a relatively consistent level of impact from the effects of COVID that we experienced in 2021. At Aeronautics, we expect sales in the mid- to high-$10 billion range. As we noted last quarter, we're projecting headwinds in our HALE portfolio, as well as lower sales on JSTARS, F-18, and our restricted business. Sales on F-35 are expected to be slightly higher in 2021 due to the EAC adjustment we booked in Q4. We expect an AS margin rate of approximately 10%, which is up 30 basis points year-over-year. For Defense Systems, we expect sales to be in the high-$5 billion range as this business returns to modest organic growth following the IT services divestiture and the completion of our Lake City contract. Operating margin rate is expected to remain very strong in the high 11% range. Mission Systems sales are projected to be in the mid $10 billion range, up from $10.1 billion of organic sales in 2021, reflecting continued strength in demand for our products. Operating margin rate is expected in the low 15% range. Space Systems is expected to remain our fastest-growing business and to become our largest segment in 2022. Sales are projected in the mid $11 billion range, up about $1 billion from 2021, with a margin rate in the low 10% range. Turning to slide 10, our total revenue guidance is $36.2 billion-$36.6 billion, representing a range of 2%-3% organic growth, consistent with the rate we estimated in October 2021. This growth is enabled by our strong backlog, which stands at over $76 billion and covers more than two years of annual sales. The 2021 book-to-bill of 0.9x was lower than our prior expectation due to the F-35 award shift to 2022. More importantly, our three-year trailing average book-to-bill is approximately 1.22 and remains the foundation of our current and future growth. As COVID-related headwinds that we experienced late in 2021 continue into early 2022, we anticipate that first quarter 2022 sales will be less than 25% of the full year. We have increased the segment operating margin rate outlook that we provided in October, as we now expect a rate roughly consistent with 2021 in the range of 11.7%-11.9%. This projection reflects our continued disciplined approach to cost management and efforts to offset mix headwinds with strong program performance. Altogether, we expect transaction-adjusted earnings per share to be between $24.50 and $25.10 based on approximately 155 million weighted shares outstanding. As shown on slide 11, this includes roughly $2 of year-to-year EPS headwinds from lower net pension benefits, driven by the reduction in CAS recoveries, and higher corporate unallocated expense due to the one-time benefits in 2021. Earnings volume from sales growth, strong operating margin performance, and the lower share count will help to offset those non-operational items. We project 2022 transaction-adjusted free cash flow of $2.5 billion-$2.8 billion, assuming the R&D tax amortization law is deferred or repealed. We continue to project about $1 billion of higher cash taxes should current tax law remain in effect. As I mentioned, our cash tax outlook includes the final payroll tax payment from the CARES Act of approximately $200 million. CapEx is expected to remain roughly consistent with 2021 on an absolute dollar basis and slightly lower as a percentage of sales. Slide 12 provides our longer-term outlook on cash. The midpoint of our 2022 transaction-adjusted free cash flow guidance is $2.65 billion and includes roughly $375 million of lower CAS recoveries than 2021. From there, we expect a double-digit free cash flow CAGR through 2024, driven by operational performance, lower CapEx, and the absence of the payroll tax headwind. Our base case again assumes deferral of the R&D tax for all periods. Speaking of taxes, we're projecting an effective tax rate of approximately 17% going forward, roughly consistent with 2021, excluding the divestiture or mark-to-market pension effects. Also, we anticipate the re-resolution of an appeals process for certain open years of legacy OATK tax filings in 2022. Audit and appeals processes are underway but in earlier stages for certain Northrop tax years. We refer you to our 10-K for additional details on the key items, both timing related and permanent in nature, to be resolved in those processes. In closing, we're proud of our 2021 performance, and we're focused on continuing to execute well in our business and financial strategy in 2022. With that, I'll turn the call back over to you, Kathy. Thanks, Dave. In summary, we have strong franchise programs that are well-aligned to budget priorities. We are focused on capturing and investing in new growth opportunities while also executing to drive earnings and cash flow growth. We delivered a solid set of results in 2021, and we are well positioned to continue growing and performing in 2022 and beyond. Our top priority for cash deployment remains shareholder return, including a competitive dividend and share repurchases. With that in mind, our board of directors recently approved an increase in our share repurchase authorization of $2 billion. Based on our outlook today, we plan on returning at least $1.5 billion to shareholders via share repurchase in 2022. Before turning to your questions, I'd like to thank the Northrop Grumman team for delivering solid operational results with dedication and perseverance. We have extraordinary talent, and this includes our leadership team. As we announced in November, Blake Larson is retiring after a 40-year career with Northrop Grumman and its heritage companies. Blake has helped to position our space business for incredible growth and, as important, a focus on performance and quality. We are grateful for his contributions to our company and our country. I'd also like to welcome Tom Wilson to my leadership team as he succeeds Blake. Tom brings strong experience in the space market. He was part of the space team, and I'm confident in his ability to lead this business. With that, we'll go ahead and open the call up for questions. Natalia, back to you. Ladies and gentlemen, if you wish to ask a question, please press star followed by one on your touchtone telephone. Again, press star one to ask a question. Please limit your questions to one question and one follow-up. If your question has been answered or if you wish to exit the questions queue, press the pound key to exit the queue. Press star zero at any time for operator assistance. Your first question is on the line of Kristine Liwag with Morgan Stanley. Thanks. Kathy, can you elaborate more on the labor and supply chain issues experienced in the quarter at Aeronautics? Are these the same issues flagged last year? How long do you expect these issues to persist? Yes. Thank you, Kristine. They are similar issues to what we flagged in the third quarter of last year, and they are related largely to labor availability in our own workforce as well as what we're seeing in our suppliers. When I talk about labor availability, that's really with the Delta variant in the late part of the third quarter, early part of the fourth quarter, and then Omicron again in the late part of the fourth quarter and now early part of 2022. We see higher levels of absenteeism. Employee safety is our first priority. We encourage people to be out of work if they're experiencing any symptoms, and we also isolate people who have been in close contact. As a result, absenteeism has been higher in these surges, and it has an impact, particularly in our high rate, high volume production lines, where people are in closer proximity and where whole work cells might be impacted if we have one person sick or out. That's why you see it more pronounced in our Aeronautics sector because that's where we have really only one high rate, high volume production program, the F-35, and we've talked specifically about the impact to that program. Across the rest of the business, it's not that we aren't experiencing these same conditions, but we're able to mitigate them better, and you see less of a pronounced impact in any one period. Certainly, we would have expected to see a stronger fourth quarter top line had we not experienced those two surges. Great. That's very helpful color. You outlined what sounds like a fairly comprehensive ESG strategy. When you look at your portfolio, are there other areas where you're reevaluating your exposure? We've taken a very comprehensive look not only at our strategy but our portfolio and assessed what that exposure is. I do wanna be clear, we are a defense contractor, and so we are supporting global security missions largely in areas of deterrence, but also inclusive of weapon systems. We expect to continue in those businesses because we believe they actually promote global security and nonproliferation, not the contrary. With that said, we have evaluated some portions of our portfolio that I've talked about in the past, like cluster munitions, and today making the confirmation that we plan to exit depleted uranium ammo as parts of the portfolio that we no longer wanted to support directly. Your next question is from the line of Seth Seifman with JP Morgan. Yeah. Thanks very much, and good morning. I wonder if you could talk a little bit about where Aeronautics goes from here and you know, how much the headwinds that are coming in 2022, you know, persist into the out years. You know, at the risk of asking about a classified program, when we think further out towards the middle of the decade and beyond, if you know, every place that you're a prime contractor gets up to you know, kind of the expected full rates of production, you know, in very rough and qualitative terms, you know, what that means in terms of the Aeronautics top line, you know, several years down the line. Ask Dave to provide a little more color and specificity. I see our Aeronautics sector as having headwinds this year that will dissipate going into 2023. We don't expect these same levels of decline as we move into next year, that trend reversing in the 2024 timeframe. I won't point to any particular program, but it is at that point in time that we expect some of the headwinds that we've discussed to be largely behind us and the opportunities for growth in higher volume of production in Aeronautics to start to kick in. That would have both an upward trajectory for top line, but we also see their margin rates progressively improving over that period as well. That gives you the macro view. Dave, anything you'd like to add to that? I think you covered it well, Kathy. You know, I think our 2022 outlook is consistent both in the mid-single-digit decline and the sources of that decline with what we talked about in recent calls. As you pointed out, we expect 2023 to be more stable and have growth opportunities beyond that. The other thing I'd point out is we're very focused on managing the business well in the meantime. Cost management, managing our capital expenditures. You know, we're focused on execution, on delivery every day in that business and looking to optimize that outlook. Okay, great. I'll stick to one this morning. Thanks very much. Thanks, Seth. Your next question is from the line of Sheila Kahyaoglu with Jefferies. Hey, good morning, everyone, and thank you. Kathy, thanks for the Aeronautics color. I was wondering if we, maybe we could transition to Space and if you could bridge us on the growth for Space. It seemed like GBSD was maybe more additive in 2021 than prior expectations. How do we think about that growth cadence, and how do we think about the balance of growth across the other Space portfolio? GBSD has been a significant component of space business, growth in the last two years, and we expect that to start to level out but GBSD to continue to be a growth element in space for the foreseeable future. With that said, you're right to point out that there was significant growth in the rest of the space portfolio as well, balancing about 50/50 with GBSD and contributing last year. We expect that same trend to continue this year with $1 billion or so of sales growth that we're projecting in space. That really is broad-based growth. It's coming from all areas of the business, so propulsion, satellites, as well as components. It's coming from both restricted and classified work as well as unclassified work, and it's coming from a variety of customers, the new Space Force, the U.S. Air Force, as well as NASA, as I highlighted today. We really are seeing space growth be quite balanced even in 2023 or 2022, but even more so as we look forward to 2023, and we expect it to continue to be one of, if not the fastest growing sector for the foreseeable future. Great. Thank you. Your next question is from the line of Ron Epstein with Bank of America. Yeah. Good morning. Yeah, Kathy, I was wondering if you could speak to you've seen some of the your HALE portfolio assets, maybe some of the legacy stuff, you know, start to fade away. Are there opportunities to replace that? You know, what's out there in that world? 'Cause it's hard to believe that, you know, that asset class is just gonna go away. If you could speak to are there opportunities for Northrop Grumman to replace those assets in the future? Yes, Ron, thanks for that question because we've talked a good bit about the headwinds in our HALE portfolio, and that's coming off of production of Global Hawk, which was not only for the U.S. Air Force, but several international customers. Triton, which is still early in its production. Those headwinds were the plateauing more of Triton and the production pause and then the Global Hawk phasing out. The reality is, autonomous systems are still an important part of both the U.S. Air Force and U.S. Navy strategies going forward, as well as an important asset in the portfolio for our international customers. We see that market is continuing to evolve. With some specificity to your question, I mentioned earlier in the call that the US Air Force Secretary Kendall has recently been more specific about launching some new efforts in unmanned systems within the Air Force, and we do see those as opportunities that we will pursue. There's starting to be some more meat on the bones as to what those specific opportunities will be. We do see the market as continuing to be attractive. Great. Thank you. Your next question is from the line of Doug Harned with Bernstein. Thank you. Good morning. You gave guidance today for cash free cash flow in 2022, 2023, 2024. I guess cash, I mean, I understand you can project some things around pension, but cash is really the most volatile quantity here. Can you give us a sense of what type of sales and earnings profile actually drives those numbers in 2023 and 2024? Doug, it's Dave. I'm happy to dig into that. I appreciate the question. You know, I think you'll find today's outlook is consistent again with what we had projected at a higher level on our October call. You know, I think it's important to provide some context when we talk about free cash flow outlook over these next few years. Our CAS pension reimbursements were over $800 million just two years ago in 2020, and we were projecting them to reach $1 billion by this point in 2022. After new legislation and a couple years of fantastic asset returns, that CAS reimbursement is now really just a de minimis benefit to us, along with much improved funded status on the pension side. That's the primary driver of the change over the last couple years. What that does for us is create a great foundation for us in 2022 to build off of and grow more rapidly over the next few years, and that supports that 10%+ CAGR we've been talking about. 2021, free cash flow was around $3.1 billion. As we talked about, CAS reimbursement is down almost $400 million in 2022 from 2021. The working capital assumption over the next year is roughly unchanged, similar in 2023 before creating more opportunity in 2024 and beyond. We talked a bit about the payroll tax deferral that ends with a payment in late 2022, so that too creates a tailwind as we enter 2023 and 2024. The other is around lower CapEx as we get into particularly 2024 and beyond. That combined with the working capital opportunities we see from performance-based payment timing and incentive timing really make us optimistic about that really strong CAGR over the next couple of years. Of course, the corollary there is that puts us in a nice position to be able to return a healthy volume of cash to our shareholders. We've noted on this call and others that that remains our top priority for cash deployment over the next couple of years with $1.5 billion as our repo target in 2022, for example. While, you know, I wouldn't read too carefully into a specific sales or margin target in these out years related to cash, we'll get more into that guidance as we get closer to those years. Certainly we'll look to continue to grow the company and deliver strong performance along the way. Okay. I think. Go ahead. Sorry. Doug, part of what you are asking is what is our outlook, and while we're not gonna provide specific numbers, as Dave said, I'll point you to some of the comments that I made. We expect continued top-line growth in this business beyond 2022, and we expect earnings expansion. Those are factored in both to our 2023 and 2024 expectations for cash. You can draw some conclusions that we see an accelerated growth profile going from 2023 into 2024 on earnings, and that would be a fair assumption to make as well based on, you know, what we've outlined for you. Then just as a follow-up, one piece of this, if I go back a few years, missiles was one of the hottest areas in the budget. I know we had this discussion around and really Northrop Grumman working to become a third missile supplier. Over that time period, we've seen essentially missile budgets turn over and legacy, certainly a lot of the large legacy programs, you know, demand is considerably less. You've got some important programs now in missiles development programs, but how do you see that market? Is this still the same kind of opportunity you were looking at a few years ago? You know, Doug, when we were looking at this a few years ago, I would say our expectations were balanced between space and missiles. What we've seen is space has outperformed our expectations. Missiles has been more in line to date with expectations, maybe not as much opportunity as we project out into the out years, but space is more than offsetting that, and we feel we've gotten a return on investment. I will say that we continue to be a strong merchant supplier in the missile space, and so as that market continues to grow and expand, and we do expect it will, particularly in hypersonic, we are partnered with the larger weapons providers to provide them important components of those weapon systems. We by no means believe that our return on investment is not maturing in the weapon space. It's just maturing more quickly and, more significantly in space. Okay, great. Thank you. Your next question is from the line of Robert Stallard with Vertical Research. Thanks so much. Good morning. Good morning. I'd like to follow up on Doug's question, really, and that's slide 12. You've got that projected large pickup in free cash flow in 2024. I was wondering if you could maybe qualitatively walk through what some of the moving parts are that are leading to that particularly strong growth in a couple of years' time. Sure, happy to. You know, like I mentioned, the 10%+ CAGR over the next couple of years really shows up particularly strongly in that 2024 timeline, and it's for a couple of the reasons that we've described. I'll go into a bit more detail on those. One is around our expectation of lower CapEx in 2024. We've talked about that coming down gradually as a percentage of sales, and we start to see that in our 2022 and 2023 guidance. As we get to 2024, we expect that to continue to come down on a dollar basis and a percentage of sales as we see, you know, the level of demand for CapEx beginning to decline a bit further in 2024. On the working capital side, you know, we have quite a few programs, obviously none of them, you know, of too much significance in the overall, you know, sales or balance sheet of the company. when we aggregate all of that, we see more opportunity for working capital efficiency drives in that 2024 timeline, than we do in 2022 or 2023, given the timing of some particular, performance-based payments and milestones and incentives. We're excited about the opportunity as we look at 2024 and beyond for free cash improvement and, of course, for the, you know, the flexibility that that provides us on the deployment side as well. I mentioned the other factor earlier, which is more, you know, just the timing of the payroll tax deferral that we had as a benefit in 2020 that we're now paying half of in 2021 and 2022. That's the only kind of unique item I'd add to that mix. Hope that helps. Okay. Yeah, it's helpful. It doesn't sound like there's anything really on the operations side that's massively accelerating in 2024. It's sort of non-operating items then. I think that's a good way to characterize it. I think Kathy covered well, you know, our expectations for growth and performance over the next couple of years. These cash flow timing issues are layered onto that outlook. Yeah. Okay. Just a quick follow-up on the cash. You mentioned that if they don't sort out this R&D tax credit thing, it could be a billion-dollar hit in 2022. What's your latest thinking on the potential hit in 2023 and 2024 if this legislation doesn't get changed? Yeah. Thanks for the follow-up question on that. I should note, it's approximately 20% lower per year after 2022. Not exactly given, you know, some of the idiosyncrasies in the timing and such. Think of that $1 billion in 2022 potential coming down to about $800 million and $600 million over the next two years. As you can imagine, it eventually levels off and normalizes when we get to 2026 or so. We are certainly still optimistic about, you know, resolving Section 174 through deferral or repeal. In the meantime, there continues to be good broad bipartisan support for doing so. It's really just a matter of finding the right legislative vehicle, and of course, that has proven challenging so far. That's why we wanted to give you know, a sense for that, volume on today's call. Your next question is from the line of Noah Poponak with Goldman Sachs. Hi, good morning, everybody. Good morning. The profit margins in Space have come down as you've, you know, layered in a significant amount of new revenue. You know, as the growth rate sort of transitions there, how should we think about how much recovery you could see in the profitability in that business? Noah, as I look at that business, we continue to layer in new development work. We talked about a few of those things today, the Glide Phase Interceptor, the NGI program. It's not just the GBSD phenomenon that is causing that margin headwind. As GBSD transitions from a development phase, even into the early stages of production, we would expect to see that be the biggest driver in a tailwind to margin rate. That happens around the middle of the decade. In the meantime, that business continues to perform exceptionally well, and the margin rates for our Space business are very solid in comparison to others. We're really pleased with that performance, as we ingest all of this development work and believe that we can maintain those rates in line with what we have projected for 2022 and see increases towards the middle of the decade. Great. Understood. Then Dave, just quickly following up on that, on the free cash flow math. If I take, you know, each of the years you've now provided back out the CapEx and then back out all the pension inputs you've provided, which, you know, sort of gets to a clean number relative to the business segments, excluding anything with cash tax or working capital. That number, as a ratio of the business segments is pretty low compared to where you've been in the past. That would indicate that you are specifically assuming a working capital headwind or some other headwind, you know, outside of the business segments. Is that the case, or is my math wrong? Hey, Noah. Sure. Happy to get into those, you know, details, you know, another time if you'd like to dig further. Yeah. It could be easier with the same numbers in front of us. Right. Exactly. In aggregate, I think the important headline here is we've had great working capital performance over the last couple of years. We project more stable working capital performance over the next couple of years before seeing that opportunity expand again in 2024. I think that may be, you know, the summary of what you're seeing is after a couple of years of just outstanding working capital performance, especially in 2020 when we had things like the progress payment improvement, and other tailwinds from the kind of industry perspective on cash. We're in a more normalized period in 2022 and 2023 before seeing that opportunity expand again in 2024. Again, happy to follow up on that sometime. Yeah. I think that gives you a feel for it. It does. It's not. You're not assuming an actual incremental working capital headwind 2022, 2023. It's just sort of relatively no change year-over-year. Yes, that's correct. Okay, thanks so much. Thank you. Our next question is from the line of Cai von Rumohr with Cowen and Company. Yes. Thank you so much. I mean, it's pretty clear that in Space, your mix is shifting toward GBSD and NGI. I assume that's because they're in the development stage, means lower margins, 2022, probably 2023, and therefore maybe 2024 they move up. You know, that would be the profile for Space. You mentioned in Aeronautics that you saw a reversal in 2024, but you mentioned dissipation in 2023 of headwinds. I read dissipation meaning that margins can get better in 2023, but does dissipation mean it's just gonna go down but not quite at the same level? I guess the bottom line is, you know, looking at the total company, 2024, 2025, we can see the margins maybe getting better, but maybe they're flat to down over the next two years. Is that a fair assessment? At the company level, Cai, what we are seeing is continued growth on the top line and margin expansion opportunity. Just as we've demonstrated, right? We've seen 40 basis points of improvement going from 2020 to 2021. As we look at 2022, we're holding that range constant with where we ended 2021, and that's largely because we have offset these mix pressures as we've brought more development work into the portfolio. What we are suggesting is that that would continue to be the case until we move the mix more in the direction of production. We are having performance improvements and cost efficiencies that are providing tailwinds on margin rates. You would expect us to continue to work those levers even with this current mix, and we see opportunity for margins even as we look into 2023. Thank you very much. Your next question is from the line of Myles Walton with UBS. Hey, good morning. Kathy, I was wondering if you could comment on the backlog and bookings opportunities in 2022. F-35, NGI, I imagine, are big movers there, but do you expect the year to end at a higher backlog? Dave, just a clarification on the $1.7 billion of prepaid credit. It's not clear that you ever recover that based on the slide of funding and CAS recoveries. Can you just clarify? Thanks, Myles. I'll start with your question about FY '22 awards and backlog expectations. We do not expect to have book-to-bill of one in 2022. We see fewer new competitive opportunities this year. It's just timing. We also see fewer multiyear awards, with the exception being the AS F-35 award, which has pushed into this year. We tend not to focus so much on singular year book-to-bill, but instead a longer term view because we have so many multiyear awards. As Dave mentioned, when we look at the last three years, our average book-to-bill was 1.22. It established a really strong foundation for us to continue to grow. As we look at this year, we still expect to end this year with a four-year trailing average of over 1.1. It just gives you a sense that we expect to not only have a strong backlog, but an average book-to-bill that continues to support the growth that we are outlining into the future. Just briefly on the $1.7 billion CAS prepayment credit. You know, we show you the next three years of current projections in a multi-decade future for our pension plans, both from a FAS and CAS perspective. That wouldn't, you know, indicate that we'd expect that to be, you know, final or resolved over the next, you know, three years in this particular forecast period. We've got many years ahead of us there, a lot of market movement ahead of us there. But I think the bottom line on the pension side is we're really enthusiastic about the continued double digit return performance in 2021, and that has put us at a better funded position than we've been at in many years. Really a good news story as of today on the pension side of things. All right. Thank you. Your next question is from the line of Richard Safran with Seaport Global. Kathy, Dave, Todd, good morning. I wanted to ask you a credit capital deployment question. In 2021, you had adjusted free cash flow of $3.1 billion, but you paid $4.7 billion in dividends and repurchases. With respect to the long-term free cash flow guide and expectations to return a majority of free cash flow to shareholders, I'm trying to get a sense of what majority means and if your actions in 2021 reflect how you're thinking long term about capital deployment. You know, for example, could you draw down the balance sheet cash a bit further? Given the recent credit upgrade, are you planning any on retiring any more debt? I was just curious about, given your long-term cash flow guide, how you might be thinking about capital deployment over the longer term. Yes. Thanks, Rich. You know, let me just start with this past year. We had the IT services divestiture which generated cash that we also deployed back into the business as we committed we would. That's what drove that higher level of capital deployment opportunity even above our free cash flow in 2021. As we're looking forward when we talk about majority of our cash being returned to shareholders, we talked about at least $1.5 billion of share repurchase this year, and that is against 2.6 at the midpoint or so of our guide in free cash flow. And of course, dividends on top of that which we have committed to continue paying competitive dividends, which our board will take up again early this year. That gives you a sense of what we mean by majority. There's also opportunity in that we have paid down debt and really solidified our balance sheet. We currently have a cash balance that's higher than what we have stated our target to be, which is around $2 billion. That gives us some flexibility as we look at not only 2022, but beyond as well. We really don't have any major debt tranches coming due. We have one in 2023 that we've outlined, but we have flexibility on whether to refinance or to pay that at this point based on where our credit rating sits. That's how we're thinking about capital deployment. Okay. Just real quick, your contract mix right now, roughly 50/50 cost plus, fixed price. I'm just wondering, if you begin thinking longer term, how you think that might trend might start thinking about when the portfolio starts leaning towards more fixed price contracting. Is that something that's a 2023 or possibly 2024 event? It gets a little higher over the next couple of years, never significantly out of balance with that 50/50 ratio. Then in 2025 is when we expect it to start to shift in the other direction. Thanks very much for all that. Appreciate it. Of course. All right, we have time for one more question. Your last question is from the line of Robert Spingarn with Melius Research. Hi, good morning. This actually touches on contract type. Seth asked about the longer term end of decade Aeronautics revenues. I wanted to ask about the risk profile in classified Aeronautics nearer term as certain programs transition from development to LRIP. Just especially in light of the, you know, the cost pressure, supply chain and so forth. Thank you. As we look at our classified portfolio, just as we do on all of our programs, we incorporate those low rate initial production lots that were priced into our estimate at complete process. We're looking at that on an ongoing basis. That risk is not only being monitored but reflected in our financial statements based on expectations as we know them today. The production experience that we have, even early on in test aircraft, and that's all informed how we think about those low rate initial production lots. Is there a way to talk about how the revenues transition in 2022 from cost-plus to fixed price, or is this all in 2023? Not at a particular program level, but we do talk about that in aggregate. As I said, our balance, even in Aeronautics, being specific to the sector, is about 50/50, and we expect that to continue to be the case in 2022. I think we are out of time. I'm gonna go ahead and wrap up. Thanks again for joining us today. Again, I wanted to thank our team also for another strong year in 2021 and for positioning us so well for 2022 and beyond. We have solid performance, and our innovation and investments are positioning us to continue delivering the products that our customers want with the urgency that they need. Thanks again for your support. We look forward to talking to you in April. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.