Raytheon's space pipeline grows behind closed doors

Add Raytheon to the list of contractors looking at space as a growing area of activity for its business and the U.S. But don’t expect them to say much more beyond that.

Here is what Raytheon executives were able to say during the company’s first quarter earnings call with investors Thursday. CEO Tom Kennedy identified ground-based space control as an opportunity “being driven by the issue relative to contested space.” He sees a strong pipeline over the next year.

That concept of contested space puts Russia, China and other U.S. adversaries as emerging players in a domain previously dominated by American satellites and other platforms.

The Defense Department has taken note of this change with its fiscal 2019 budget request that includes a 9 percent increase in unclassified national security space spending to $12.5 billion, according to SpaceNews.

However, that figure is what the Pentagon is willing to put out there for public consumption. As Kennedy told analysts Thursday: “Once I get beyond the words ‘contested space,’ things get classified pretty quickly.”

Northrop Grumman CEO Wes Bush has also said as much with respect to what companies can say about classified activity as the U.S. government is increasingly looking to keep national security technology information secret.

Bush’s comments referenced the large satellites and other in-orbit platforms Northrop focuses on just as its pending acquisition of Orbital ATK looks to add more small and medium-sized vehicles. Northrop is looking to play a major role in the government’s re-architecture of its space infrastructure.

What Raytheon’s Kennedy brought up Thursday is the other side of the equation on the ground. He said their Dulles, Virginia-based intelligence, information and services segment is “heavily involved in the area of space control, especially in ground stations and ensuring our ability to have a resilient and reliable space control capability.”

The $6.2 billion IIS segment -- Raytheon’s government services arm -- already houses the large GPS “OCX” program to help operate the Air Force’s GPS III satellites from the ground.

Key to the space control capability going forward is having sensors on those satellites to support resiliency but also tiny enough to go on small- and medium-sized satellites, Kennedy said,

“There's a lot of our work in that area. And that's about as far as I can go relative to the area of contested space,” he added.

As evidence of growth in secretive work, 48 percent of Raytheon’s IIS first quarter bookings are classified. And the segment’s first quarter revenue of $1.58 billion was almost 5-percent higher from the prior year period in part on more classified activity.

IIS is facing one major headwind this year in the three-part recompete of its Warfighter Focus program for training-related services to the Army. Raytheon is protesting the $3.5 billion “TADDS” contract for training devices awarded to Lockheed Martin in March.

The two other Warfighter Focus recompetes are due for award over the summer, one with a single winner and a second with more than one winner. Raytheon’s guidance for flat IIS sales this year assumed a winding down of Warfighter Focus activities.

Excluding Warfighter Focus, Raytheon expected IIS to see 3 percent-5 percent sales growth this year. Chief Financial Officer Anthony O’Brien said the segment is adding more longer-duration programs and moving away from others on shorter-cycled contracts.

Outside of space, Kennedy identified the second growing area for IIS as “(U.S.) government security and then also including strong international cybersecurity business.”

The business already won the almost $1 billion “Domino” cybersecurity services contract with the Homeland Security Department and a similar project with a country Raytheon has not identified.