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4,100 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Thanks, Maria. Good morning, everyone, and thank you for joining us on our second quarter 2024 earnings call. Over the past few months, Lockheed Martin's people, systems and platforms have again demonstrated their ability to enhance security in Eastern Europe, the Red Sea and the Middle East. From the PAC-3s critical role in air defense, to the Aegis Combat System with AI augmentation to the F-35 of this advanced sensor and data management capabilities, our company has made major contributions to Allied and Partner defense. We continue to demonstrate the impact of our 21st Century security strategy by harnessing the latest digital technologies to continuously improve mission effectiveness, strengthening and scaling defense production system, and expanding industrial cooperation among our allies and partners. Consequently, demand for our defense technology solutions remains robust, with a backlog of nearly $160 billion greater than two times our annual revenue. Our strong performance so far in 2024 extends beyond blast backlog as well giving us confidence to raise our 2024 full year outlook for sales, segment operating profit and EPS. In the second quarter, sales increased 9% year-over-year and 5% sequentially and reflected growth in all four of our business segments. The supply chain continues to improve and defense outlays also continue to increase. Our focus on operational execution helped us achieve segment operating margins of 11.3%, up 20 basis points compared to last year's second quarter and free cash flow of more than $1.5 billion, an increase both year-over-year and sequentially. Jay and Maria will talk more about the specifics of the quarterly results in a moment, but suffice it to say, we are pleased with our financial performance and momentum so far in 2024. I'm especially happy to report the progress we have made on the F-35 program. As announced last week, we began deliveries of the first Technology Refresh 3 or TR-3 configured F-35 aircraft to the US government. The TR-3 upgrade and |
4,101 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | began deliveries of the first Technology Refresh 3 or TR-3 configured F-35 aircraft to the US government. The TR-3 upgrade and further Block 4 enhancements represent a critical evolution in capability and their full development remains a top priority for us. These and further software updates over the life of the program will ensure that F-35 remains an effective deterrent to aggression and the cornerstone of Joint All-Domain operations now and decades into the future. We continue to produce at a rate of 156 aircraft per year and expect to deliver 75 to 100 aircraft in the second half of 2024. Over 95% of TR-3 capabilities are currently being flight-tested and we look forward to delivering full TR-3 combat capability to the customer. In addition, we expect deliveries of F-35 aircraft to exceed production for the next few years. Jay will talk about the financial aspects of our current status in a moment. Continued close collaboration with the joint program office, or the JPO as known and across our industry partners has been and will be essential to meet and exceed expectations of this critical national defense program in a timely and cost-effective manner. I met with my F-35 industry CEO colleagues in Fort Worth recently to set plans for enhancing the cooperation on our software and hardware and test integration processes, among other initiatives to increase speed and efficiency in the program. The TR-3 hardware and software provide a significant upgrade in computing power that enables major improvements and capability to our airmen, sailors and marine as well as to our partner and allied nations. International customers continue to recognize the superior capabilities of this, the most advanced fighter aircraft in the world in key aircraft node in the DoD's Joint All-Domain architecture. On the international front, Israel announced a third squad of F-35As, increasing their fleet by 50%. Greece is in the final stages discussion with the U.S. government to procure the F-35 and we continue to see interest from |
4,102 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | 50%. Greece is in the final stages discussion with the U.S. government to procure the F-35 and we continue to see interest from Romania as well as a potential new customer. Beyond the F-35 is the quarterback of Joint All-Domain operations our ongoing collaboration with the U.S. military during major exercises with deployed operational units exemplifies our commitment and ability to enhance readiness and integrate capabilities across all of our customers' missions and priorities. In June, new advanced capabilities from across Lockheed Martin contributed to the tenth iteration of U.S. Indo-Pacific Command's Valiant Shield exercise. During this exercise, there were several significant milestones demonstrating how we are continually improving our forces capabilities and enhancing our deterrence posture. One example is that we successfully integrated digital command and control capabilities with the Indo-Pacific Command's Joint Fires network, enhancing real-time decision-make commanders and operational agility for the forest. Our operational planning data fusion engine was employed to coordinate joint operations using live real-time data producing actual tasking orders at combat relevant speed. And another example from the same exercise, Lockheed Martin Space and Lockheed Martin Aeronautics jointly demonstrated the ability to autonomously optimize intelligence, surveillance and reconnaissance, or ISR, collection and enhance their imagery for quick, automated target detection and classification, facilitating data delivery across a wide range of space-based and airborne platforms like never before. In addition, the U.S. Army tested our Precision Strike Missile, or PrSM, against the moving maritime target in the Pacific Ocean. This next-generation missile enables further improved range and precision to deter potential adverse series from even greater distances. According to the Army, this test is a significant step in the PrSM programs progress. We've also moved toward realizing the 21st Century Security Joint |
4,103 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | test is a significant step in the PrSM programs progress. We've also moved toward realizing the 21st Century Security Joint All-Domain vision with the signing of a landmark agreement with Australia's Department of Defense to build their future joint air battle management system. They call it Project AIR6500 Phase 1. As we've discussed before, this system will provide the Australian defense force with leading-edge integrated air and missile defense capability using next-generation technologies to combat high-speed threats and establish Australia's integrated air and missile defense as one of the most highly advanced in the world. We also continued to demonstrate 21st Century security in other innovative ways. In May, our Skunk Works Tactical artificial intelligence team successfully executed their second set of flight tests with the University of Iowa’s, Operator Performance Laboratory. RAI flew an L29 jet aircraft by means of heading, speed and altitude command sent directly to the onboard autopilot than to the plans flight controls. This test has shown our AI team can rapidly develop, iterate and integrate artificial intelligence technology for autonomous flight operations. We're also making great progress in another leading-edge defense tech initiative, hypersonic strike, which is a critical element of deterrence in today's world. As announced by the Department of Defense in June, the US Navy and US Army completed an end-to-end all up ground flight test of a common person missile, core to the Navy's conventional prompt strike or CPS and the army's long-range hypersonic weapons programs. The test marked a major step forward for the nation's development of hypersonic systems by Lockheed Martin. Pivoting to the supply chain, we continue to explore opportunities to drive our concept of anti-fragility across the global defense industrial base. For example, we recently signed a collaborative memorandum of understanding with Ryan Mittal to work together on land, air and naval opportunities. One of our first |
4,104 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | memorandum of understanding with Ryan Mittal to work together on land, air and naval opportunities. One of our first initiatives is the new Global Mobile Artillery Rocket System or GMARS is a highly interoperable two-pod launcher system intended to fire the MLRS-based munitions. Combining these combat-proven systems will help address the growing demand for long-range rocket capabilities in Europe and elsewhere. On our PAC-3 program, international collaboration remains strong as well, including development of indigenous capabilities with the opening of a PAC-3 MSE launch tube production line in Poland, as well as a memorandum of understanding with Grupo Oesía in Spain to provide an opportunity to manufacture factory MSE parts for worldwide customers. Spain and the United States also formalized an agreement for Spain to purchase pack free MSE missiles and related support, making Spain PAC-3s 16th partner nation. I'd also like to briefly discuss the latest status of the US defense budget. The House approved their version of the FY '25 defense appropriations. So the focus now shifts to the Senate where the process continues before the reconciliation phase later this year. We believe our portfolio is well-aligned to current and future customer mission priorities, including air superiority with the F-35 and CH-53K and Black Hawk or UH-60M. Our integrated air and missile defense with PAC-3 and NGI, hypersonics with CPS and the LRHW I just mentioned a minute ago and tactical strike weapons and munitions with JASSM, LRASM, PrSM, JAVELIN and GIMLERS. Ultimately, we look forward to the conclusion of the USG appropriations process and the continued utilization of the existing supplement mental funding. On the international front, I was encouraged by conversations I had at the recent NATO Summit a few weeks ago in Washington. International partners and allies remain steadfast in their pursuit of elevated defense spending to strengthen the overall integrated deterrence posture of the alliance given the tragic and ongoing |
4,105 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | elevated defense spending to strengthen the overall integrated deterrence posture of the alliance given the tragic and ongoing conflict in Ukraine. I'll now turn it over to Jay for award highlights and additional commentary on our financial results. |
4,106 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Thanks, Jim. Similar to last quarter, I'll provide an overview of consolidated financials and touch on a handful of operational items before handing off to Maria, who will cover business area financials, and then I'll come back to discuss the updated outlook. Starting on chart 4. The positive momentum we had to begin the year continued into the second quarter with sales up 9% to over $18 billion, led by RMS and MFC. As Jim mentioned, throughput remained strong reflecting an improving supply chain and internal operating cadence. Segment operating profit of $2 billion was up 10% year-over-year, and consolidated margins were 11.3%. With all four business areas achieving double-digit return on sales, the first time since the third quarter of 2022. Net favorable profit adjustments in the quarter were higher than prior year and were 21% of segment operating profit, driving the stronger margins. GAAP earnings per share of $6.85 increased 3% year-over-year, driven by higher profit and lower share count, partially offset by severance impairment charges at RMS and Sikorsky, higher interest expense and lower pension income. On the new business front, we recorded over $17 billion of orders in the second quarter for a book-to-bill ratio just below one. We generated $1.5 billion of free cash flow in the quarter, bringing our year-to-date total to just under $2.8 billion, and we continue to make the necessary investments in innovation and infrastructure to position the company and our customers for future success with $400 million -- $405 million in research and development and $370 million in capital expenditures the second quarter. Finally, we returned over 100% of our free cash flow to shareholders via share repurchases and dividends. Now, I'll touch on a few business activities in more detail. The order strength continued at MFC with a book-to-bill over two in the quarter, led by the $4 billion plus Army award spanning multiyear PAC-3 delivery requirements and supporting our production ramp projections. And |
4,107 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | $4 billion plus Army award spanning multiyear PAC-3 delivery requirements and supporting our production ramp projections. And Poland officials signed a letter of acceptance to purchase 400 JASSM ERs, the largest international order and program history, providing another ally with the latest generation JASSM variant. At Sikorsky, its platforms remain in high demand as the US State Department announced approval for four foreign military sales of Black Hawk to Austria, Brazil and Sweden. This opens the door to the potential sale of 36 Black Hawks, adding 12 helicopters each to each country's existing Blackhawk fleet. In addition, the government of Greece signed a letter of offer and acceptance for 35 UH-60M BLACK HAWK helicopters. These upgraded aircraft will support the Hellenic Ministry of Defense's ongoing modernization. It will serve as a dependable multi-role helicopter with unmatched interoperability to support vital national and allied security missions. In the space domain, late last month, NASA selected Lockheed Martin to develop and build the nation's next-generation weather satellite constellation for NOAA known as Geostationary Extended Observations, or GeoXO. This award builds on our prior work with environmental sensing technologies, which recently culminated with the launch of GOES-U, which will leverage advanced instruments and rapid updates to provide crucial data for weather forecasting, severe storm tracking and climate monitoring. Let me stop here and hand it over to Maria to get into the business area of financial detail. |
4,108 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Maria Ricciardone : Thanks, Jay. Today, I'll discuss second quarter year-over-year results for the business areas, starting with Aeronautics on Chart 5. Second quarter sales at Aero were up 6% year-over-year. The increase was primarily due to higher volumes across F-35 and the continued production ramp on the F-16 program. Segment operating profit increased 5% with higher volume and favorable mix being offset by lower profit booking rate adjustments. Regarding aircraft deliveries, we resumed F-35 deliveries in Q3, as Jim shared, and we've delivered our 1,000 F-35s. On F-16, we delivered four in the second quarter and are targeting around 20 for the year. For 130J, we delivered five in the quarter, reaching a milestone of 2,700 deliveries of this critical tactical airlifter and expect around 20 deliveries for this year. Turning to Missiles and Fire Control on Chart 6. MFC had another strong quarter with sales up 13% from the prior year, driven by production ramps on a handful of our precision fires programs within the tactical and strike missile segment, primarily Guided Multiple Launch Rocket System, GMLRS and Long Range Anti-Ship Missile, LRASM. Segment operating profit increased 21% year-over-year due to higher profit booking rate adjustments led by the PAC-3 and Apache programs margins returned to 14.5%, which is more in line with historical rates. MFC backlog reached a record level of almost $35 billion in Q2 supported by continued global demand for several of our missile ammunition programs. Key awards included the PAC-3 award that Jay mentioned as well as $1.3 billion in combined awards for launchers, including HIMARS, and M270 upgrades and a $500 million follow-on production contract for JAGM and HELLFIRE to support U.S. and international customers. On the delivery front, I'll highlight a few of the key program quantities in the quarter. We delivered 100 PAC-3 interceptors, more than 2,000 GMLRS rockets, over 2,700 HELLFIRE missiles and 11 HIMARS systems. Shifting to rotary emission systems on Chart 7. |
4,109 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | than 2,000 GMLRS rockets, over 2,700 HELLFIRE missiles and 11 HIMARS systems. Shifting to rotary emission systems on Chart 7. Sales increased 17% in the quarter to over $4.5 billion primarily driven by higher volume at integrated warfare systems and sensors on radar and laser programs as well as the Canadian Surface Combatant program. Sikorsky programs also saw higher volume led by BLACK HAWK and CH-53K. Also of note in the quarter, we delivered five S-70 helicopters to international customers, which resulted in about $115 million of revenue on a passage of title POT basis. Operating profit increased 9% year-over-year due to higher volume, partially offset by lower profit booking rate adjustments. Now, for a brief summary of helicopter deliveries. In addition to the five S-70 helicopters I mentioned, Sikorsky delivered five Black Hawks, four combat rescue helicopters, and one VH-92 Presidential helicopter in the quarter. On the delivery front, a few of the key program quantities in the second quarter, we -- yes, sorry about that. Let's go to space. Finally, with space on Chart 8. Sales increased 1% year-over-year. The growth was driven by higher volume on strategic and missile defense programs, primarily hypersonics and Fleet Ballistic Missile, FBM. Partially offsetting this growth was lower volume on classified programs and Orion. Operating profit increased 11% compared to Q2 2023, driven by favorable mix and higher profit booking rate adjustments. Now, I'll turn it back over to Jay to wrap-up prepared remarks. |
4,110 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: All right. Thanks Maria and let's shift over to the outlook on Chart 9. Given our strong year-to-date performance, sustained back position, and improving visibility into key programs, we're raising our expectations for Lockheed Martin's 2024 financial outlook for sales, segment operating profit, and earnings per share. We're increasing sales by $1.75 billion at the midpoint and tightening the range to $70.5 billion to $71.5 billion. The new midpoint reflects a solid 5% growth from 2023 with increases across all four business areas. We're also increasing segment operating profit expectation based on the higher sales with the new range of $7.35 billion to $7.5 billion and anticipate consolidated segment operating profit margins to remain at 10.5%. Business area margins remained consistent with our prior guidance at Aero and MFC, while RMS is down about 50 basis points at the midpoint and space is up 40 basis points at the midpoint. The RMS reduction is driven by Sikorsky as the business faces continued cost pressure and absorption headwinds, the impact of which have exceeded benefits from its cost reduction programs. Conversely, space is benefiting from solid performance and proactive reduction efforts. Moving to earnings per share on Chart 11. We're increasing the midpoint by $0.35 to $26.35 with a range of $26.10 to $26.60 for the full year. Primary drivers of the change are shown on this chart with increases coming from incremental profit of $0.49 and other below-the-line items of $0.13. Partially offsetting those items are the RMS charges totaling $0.29 and from the severance actions and the asset write-downs taken in the second quarter. As Jim mentioned, we're encouraged by the F-35 delivery restart and continuous progress being made towards delivering full combat capability. We're holding our free cash flow expectation in the range of $6 billion to $6.3 billion, which absorbs a potential unfavorable impact from longer deferrals of final F-35 delivery payments. This is made possible by proactive |
4,111 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | a potential unfavorable impact from longer deferrals of final F-35 delivery payments. This is made possible by proactive actions taken across the company to offset these potential headwinds. On the cash deployment side, we still expect over $3 billion of IR&D and capital investments, while the dividend, along with the expected $4 billion of share repurchases, maintain attractive shareholder returns. Lastly, on backlog, we continue to expect backlog to grow in 2024 even with the higher sales outlook, which provides a line of sight to future growth. Before I wrap, I'd like to highlight a few other key assumptions regarding the updated outlook. First, we expect F-35 18/19 to be awarded this year, maintaining program funding and continuity. Second, we continue to expect $325 million of losses on the MFC classified program, of which $100 million has been recognized year-to-date. And third, this outlook does not assume any pension contributions in 2024. So in summary on Chart 12, our solid first half results give us confidence in raising the full year outlook for sales, profit and EPS, while holding the cash flow outlook, reflecting our ongoing efforts to deliver predictable, and improving operating and financial performance as is expected of us. It all starts with a relentless focus on executing to our programmatic commitments and delivering critical 21st Century security mission capabilities where we strive to continuously improve. To that end, we are investing in our people, processes and systems through the 1LMX transformation, with the goal of unlocking step changes in efficiency, velocity and program execution that delivers security capabilities in ahead of ready speed to our customers. And we're confident that these management priorities and actions convert to a compelling long-term value proposition for customers and shareholders alike. With that, Lois, let's open up the call for Q&A. |
4,112 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: Thank you [Operator Instructions] The first question comes from the line of Kristine Liwag from Morgan Stanley. Please go ahead.
Kristine Liwag: Hi, Jim, Jay and Maria. Release from Farnborough, the F-16 is flying in the background right now. So apologies for the grower in the background.
Jim Taiclet: Let's call it the sound of Freedom, Christine, it's good.
Kristine Liwag: I mean, it's a crazy or beautiful aircraft here. So the delivery guidance for the F-35 in the second half of this year is still fairly wide. Can you talk about the scenarios where there are lower and upper? What would have to happen for you to hit the lower upper end of the range? And also with production at 156 per year, when should deliver and production catch up for the program?
Jim Taiclet: So Kristine, I'll start and emphasize that we're going to do this unwind and conduct the deliveries with safety and quality is our number one priority. So just starting with that foundation, we actually have the ability to add resources, which have already been identified and designated. And that's test pilots, maintenance team, software and hardware engineers to get the flight test done that we need to, be at the higher end of that range. But we want to make sure that if it's weather, if it's pilot, crew rest issues, anything like that, we will accommodate for those. But we should -- we have the resources in place, I'll say, that should enable us to get to the higher end of that range, if you will. |
4,113 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Yes. Let me just add, just to reiterate, Kristine, we expect anywhere between 75 to 110. Yes, with less than six months left, it is a wide range. I would say, over the next few months, we'll get much better insights into the induction and flow of aircraft going into the test and production cycle, really bringing in aircraft that are parked as well as aircraft that are coming outside of the -- from the production flow. And as we get those learnings, we'll be able to get a better assessment what the delivery requirements will be and what we expect for the year. And so it will take us a couple of months just to make sure we get that process learned out. It's well planned, but we actually have to demonstrate it in actual practice. As far as the future, from terms of reducing on the backlog of aircraft, our target is anywhere between 12 to 18 aircraft deliveries per month and really to burn down the aircraft backlog. And so that will take us a number of years here to get through that. We've already made progress so far. Since the announcement of the restart, we've delivered 10 aircraft as of Monday yesterday, six with the TR-3 configuration and four with the TR-2 configuration. So we think we're off to a very good start. But again, we really need to have a -- just to monitor the operating cadence of being able bring aircraft from two different flows into one test -- flight test flow. And again, we'll tighten that up later on in the year.
Operator: Thank you. The next question is from Cai von Rumohr from TD Cowen. Please go ahead. |
4,114 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: Thank you. The next question is from Cai von Rumohr from TD Cowen. Please go ahead.
Cai von Rumohr : Yes. Thanks so much. So I think you did say that next year, you're going to deliver more F-35s than you will produce. And I think at one point, you mentioned that you get paid $7 million upon each delivery. Walk us through -- you mentioned also the deferral of some payments. So next year, what happens to accrued revenues, because I think with higher deliveries, I assume the final delivery payment basically is incremental even though under POC, the work itself should be relatively level. And then secondly, the cash flow impact. I know that there's a deferral on the payments, but if it was really $7 million, that's potentially a substantial cash flow plus. Thanks so much. |
4,115 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave : Okay. Cai, let me just say, first of all, as Jim mentioned, restarting delivery was an important first step really towards delivering the fully combat capable aircraft. Aircraft, the withhold -- the aircraft withhold this final delivery payment is a timing item, as you mentioned. And we're working with the customer to finalize the terms of those final delivery payments. We're making excellent progress, but it would be immature or premature to give details of that because it remains subject to negotiation. Suffice it to say that you will see timing benefit over the next few years as we deliver, but I think we still need to work through and finalize this agreement with the customer. As far as the revenue, I really wouldn't see -- expect much of an incremental benefit in terms of revenue. We continue to build at a 156 rate. We are seeing production a little bit higher this year. But for the most part, we should expect that to be, I think, fairly stable. And yes, we'll see incremental activity in terms of test activity, which does increase penetration on a percent complete basis. But I don't really view that being all that material. And so we just hold the production. We'll expect F-35 to grow mostly from sustainment next year and in the years to come. I think it's important to mention as well that we are -- the headwind on funnel delivery payments are here in 2024. We're holding our outlook, so we're absorbing that with better performance in the rest of the portfolio. Yes, we will see the timing benefits downstream. But as I mentioned before, we have to get just the whole delivery cadence straight. And I just want to make sure I had it straight in terms of the last question. We're targeting anywhere between 12 to 18 months to fully deliver on these parked aircraft. And as I mentioned, we just need to learn out the process over the next few months here and get -- to be able to give better guidance on that.
Cai von Rumohr: Thanks so much. |
4,116 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Cai von Rumohr: Thanks so much.
Operator: Thank you. Our next question is the line of Scott Deuschle from Deutsche Bank. Please go ahead.
Scott Deuschle: Hey, good morning.
Jim Taiclet: Good morning.
Scott Deuschle: Jay, you've been seeing some nice momentum on revenue and now you're seeing some of it on margins as well. I guess at what point do you think you'll be ready to start talking about maybe a better medium-term free cash flow per share growth outlook in this mid-single-digit rate you've been talking about for a while. Do you just need to let these pension headwinds next year and see a bit more growth acceleration? And then you're there. Just curious for how you're thinking about that? thanks.
Jay Malave: Yes. No, I appreciate the question. We've said over the last few months and really the last year or so that our goal has been to increase absolute free cash flow in the low single-digit clip, and then that augmented with share repurchase would get us to a mid-single-digit free cash flow per share expectation. That remains of the outlook. We'll go through our multiyear forecast over the next few months here, we'll be able to give you a better update in the October timeframe. I think given the fact that we're at a higher level in 2024 is a positive, and we continue to expect to grow in 2025 off this higher baseline. So, that in and of itself should result in a higher cash flow baseline as well. But there's a lot of work to be done between now and then. And so I would like to have the benefit of going through that in more detail, and we'll update that to you at least preliminarily in October.
Scott Deuschle: That’s great. Thank you.
Operator: Thank you. The next question is from Gavin Parsons from UBS. Please go ahead.
Gavin Parsons: Thanks. Good morning.
Jim Taiclet: Good morning. |
4,117 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Gavin Parsons: Thanks. Good morning.
Jim Taiclet: Good morning.
Gavin Parsons: Maybe sticking on revenue. You guys have talked about supply chain kind of being a bottleneck, is the upside more on the demand front or on the unlocking of the supply chain side? And if latter, can you just talk a little bit more about supply chain and what you expect going forward in the second half, because I think the second half a lot less growth?
Jay Malave: Well, I'd say it's a combination of both. We ended the year in 2023 with a $160 billion backlog, which was a record. We ended here in the second quarter at $158 billion was slightly below where it ended a record with significantly higher sales than we thought through the first half of the year. We expect -- our continue -- as I mentioned in my prepared remarks, that we continue to expect the backlog to increase at end of this year, which gives us more visibility into further growth in 2025 and beyond. So, we're very bullish on where that stands from a backlog standpoint. As far as supply chain, we did see improvement. We are seeing continued improvement there and on-time delivery. The part shortages continue to come down. Having said that, there are still areas where we're -- particularly where we're ramping up some of our major programs where we still have some work to be done there. And we're still going through many of the initiatives and actions that -- proactive actions that we've talked about in the past, which is some in-sourcing on some capabilities, dual sourcing, where it makes sense. Also, we have deployed, and we continue to deploy personnel to provide on-site assistance at our suppliers. And of course, we also continue to look at product redesign. But I'd say, by and large, we are seeing an improvement in the in the supply chain, which also gives us confidence for that continued growth in the future. |
4,118 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: And Gavin, I just give you some qualitative background on demand side. Our strategy includes driving the latest digital technologies kind of through an open architecture, standard-based system to the DoD. And by doing that and making our product services platforms compliant or in line with those future concepts of open architecture and standards to pull through those products, services and platforms. So we're starting to see that already. And we're demonstrating whether it's exercises or in real conflict like the Red Sea, doing things like over-the-air updates to the AEGIS system, which is decades old, but it can be improved very quickly now just like when you download overnight on your Tesla, we can do a download overnight over the air on the AEGIS radar and combat control system and double, triple the effectiveness against things like low flying drones and cruise missiles. So we're actually implementing those kinds of things on a standard base architecture into our products and services today, which I expect will continue to pull them through.
Gavin Parsons: Great. Appreciate the detail.
Operator: Thank you. Our next question is from Pete Skibitski from Alembic Global. Please go ahead.
Pete Skibitski: Hey, good morning, guys. Guys on missiles and fire control, if you think about what was appropriate in the 2024 baseline budget and the Ukraine supplemental, how much order flow is still to come there for you guys at MFC? And also, just if we think about the growth cadence there, you talked about $750 million a year in the past, you're going to be well above that this year. So I'm just wondering if that cadence is going to come back into play 2025 on a higher baseline. Thanks. |
4,119 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Sure. I mean there's still plenty of runway in orders at MFC. As I mentioned, the book-to-bill in the quarter was above 2%, and we're still expecting additional orders at the end of the year, particularly in JASSM/LRASM in second half here. They're still even under supplemental, there's some opportunity there to continue to build their backlog and so we've talked about $750 million. You're right. They're going to be above that this year. We see continued growth there next year, and they're going to be, again, the highest grower within Lockheed Martin for the next three to five years. So we're pretty bullish on that. Much of that is already in the backlog, but there's still plenty more to come in terms of build -- continuing to build that backlog. The key for us is to make sure that we can meet the demand and ramp up all these programs to our customers' requirements. And the team has been laser-focused on making sure they can do that, and you're seeing the benefits of that this year with the sales coming in higher. So again, we keep our head down, continue to deliver. The demand is both domestic and international at MFC. And again, they're going to be a significant source of growth for Lockheed Martin or for the next three to five years. |
4,120 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: And Pete, it's Jim. Again, on a qualitative perspective, I tell our teams and our executives internally we're in the aerospace and defense industry, but we're in the deterrence business. right? So if you step back and say what contributes to deterrence from an MFC, for example? And I think anybody that's everyone watching Clint Eastwood would movie will know that, if we run out of ammunition, you're in a lot of trouble, right? So part of deterrence is showing that, a, you have enough ammunition stocks to prevail and sustain your operations from an aggressor. That's the first thing. Second thing is you also – it's helpful to demonstrate that you can produce at rate and ramp that rate quickly. That's our anti-fragility program. And the third piece of it is you can produce and repair MFC and other products in the local theater and not have to bring them all the way back to the US to fix them or drive that production up. That's the third part of our strategy. So everything we do is based on deterrents and strengthening that. And MSC has a huge role in making sure that adversaries know that we've got enough stocks in MFC type products, and we can ramp that rate and we can produce in different places and repair in different places should they act. And that's really kind of a qualitative underpinning of what Jay was talking about.
Pete Skibitski: Appreciate it guys.
Jim Taiclet: Thank you.
Operator: The next question is from Seth Seifman from JPMorgan. Please go ahead.
Seth Seifman: Hey. Thanks very much and good morning. Probably just a quick one. Sorry about the background noise here. Just a quick one and kind of big picture. I think, Jay, I think you've said in the past that there was good potential for growth to be at least as strong as 2024 and 2025 and good potential for that growth rate to accelerate. Is that still the case off of the higher revenue base and a higher growth rate here in 2025 -- in 2024? |
4,121 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Yeah. It's a good question, Seth. And as I mentioned before, we're going -- just going through our process to lay out our multiyear outlook, including 2025 here over the next few months. What I would tell you is that the backlog visibility that we have would support another year similar to 2024. We have to have to go through though, and the operational. The practical operational capability to deliver that is something we go through. And so the demand is there. We have to make sure the supply can meet that as well. That's a pretty significant step change over really a two-year span on some of these ramp programs that we're dealing with. And as I mentioned before, we're still dealing with some programs that are still working through trying to get off to the ramp rates.
Operator: Our next question is from Sheila Kahyaoglu from Jefferies. Please go ahead.
Sheila Kahyaoglu: Good morning, guys. Thank you. Maybe if we could talk about profitability. If we look at first half profitability of 10.7, second half implied in the low 10s. Can you walk through some of the moving pieces, maybe in terms of supply chain productivity, I know volumes are lower and how we think about the exit rate for the year? |
4,122 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Yeah. The second half of the year, Sheila, is -- I mean the most significant would be the program loss at MFC that we have to record in the second half. So as I mentioned in my prepared remarks, we recorded about $100 million here year-to-date. In the second half, we expect about another $225 million. So that will put pressure on margins in back half. The second piece I would say is that, we would have -- even though we had a very strong and solid profit adjustment first half that slows down a little bit in the back half of the year just based on program timing, the timing of risk retirements -- and so just the risk retirements and profit adjustments are not all linear, they incur different aspects of a program life cycle. But what I would say is we feel comfortable with where we're headed. We've talked about 2024 being a low watermark for all net-net margins, and we expect it to improve gradually over the next few years, and we still feel confident that can take place.
Sheila Kahyaoglu: Thank you.
Jay Malave: All right.
Operator: Thank you. The next question is from Ken Herbert from RBC Capital Markets. Please go ahead.
Ken Herbert: Yes. Hi. Good morning. I just wanted to see and apologies if I missed this, but can you comment on your view of NGAD, and how you're thinking about that now moving forward? And what we might be thinking about in terms of the next catalyst for you on this particular program? |
4,123 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet : Sure, Ken. It's Jim here. So when it comes to NGAD as a program, we're not authorized an industry to speak to the details of that. So you'd have go to the U.S. government to get insight into that particular program. But I can tell you what we're doing to prepare for the next-generation combat aircraft. So on the investment front, since 1920 -- or 2021 rather, we opened the gates on four high-tech facilities that have the clearance -- the security clearance capability to produce NGAD type components, let's call them, all right? One of them is in Florida, Skunk Works in California, opened a new major factory that I was there to see. We have it in Alabama, two in Georgia. So we have these accredited facilities up and running ahead of the demand, and we're working on programs and products in that classified capability space. So we've already got these facilities up and running. The other resource we have is human in Skunk Works, Marietta and in Fort Worth and other places that can design, test and build using our digital transformation engineering technologies and the digital twin these kind of components, aircraft and others that might go into a NGAD concept. So I can just tell you that Lockheed Martin is ready to produce. We're ready to design. We're ready to build. We are in the process of making sure we're capable in the arenas that the Air Force and the Navy are going to need us to be. So that's really all we can say about that. But I can assure you that we are competitive and ready to go in this space if and when the government pulls a trigger on a real competition and want somebody will be able to produce, we can do it.
Operator: Thank you. And the next question comes from the line of Rob Spingarn from Melius Research. Please go ahead. |
4,124 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: Thank you. And the next question comes from the line of Rob Spingarn from Melius Research. Please go ahead.
Rob Spingarn : Hey, good afternoon, or I guess, it's still morning. But I wanted to ask you about on F-35 and congrats on the resumption of deliveries. But when we think about TR-3 and on the production side of the equation, how is the supply chain in terms of being able to supply enough material and integrated core processors on time for you to maintain the 156 per year. So as the mix goes more toward all TR-3, how well prepared is the supply chain for that?
Jim Taiclet : So we got together, Rob, as I mentioned a few minutes ago in the prepared remarks in Fort Worth about a month with the CEOs of half of those companies that contribute to this in a significant way. We communicated the importance of exactly what you're speaking to which is not just a core processor, but there's a range and a number of other components across all of these companies that need to maintain or increase their production rates and modernize their equipment along the way. And so that communication of those suppliers has been made. They know our plans were well integrated -- more integrated than we ever have, I think, when it comes to test and planning and design iterative software across multiple companies, et cetera. So we're in a position, and as suppliers are telling us they will meet the demand. We will monitor them and continue to even put people in their sights when we need to, to make sure that happens. But we've got the major suppliers together, and they understand the demand rate, quality level we need and a better integration plan for test and development that we have built going forward.
Rob Spingarn: And Jim, just following on to that, how do we think about the cadence for retrofit from TR-2 to 3? |
4,125 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Rob Spingarn: And Jim, just following on to that, how do we think about the cadence for retrofit from TR-2 to 3?
Jim Taiclet: So you're right, Rob, that this is designed for backward integration, if you will. There'll be a schedule that the US government. It comes up with for TR-3. There may be -- it will be up to them as to the cadence, the investment rate, et cetera. But over a period of time, there will be a great number of originally built TR-2 aircraft that will get converted. There's some hardware software upgrades to that.
Rob Spingarn: Is this the kind of thing you expect to be talking about soon? Or this is a few years out, we should be focusing on new production aircraft for now TR-3.
Jim Taiclet: Yes. So again, this is a US government policy decision, so it's better to request that kind of commentary from them, Rob. But we're, again, ready to do it at the rate that we expect -- that they come at us with.
Rob Spingarn: Great. Thanks, so much.
Jim Taiclet: Thank you.
Operator: The next question is from Noah Poponak from Goldman Sachs. Please go ahead.
Noah Poponak: Hey good morning everyone.
Jim Taiclet: Good morning.
Noah Poponak: Jay, could you give us the updated -- I guess, if you snap the line today or just ballpark as you see it, cash flow, pension contribution in CAS recovery for at least '25, and I guess if you had it, and we're willing to give it beyond that would be helpful. And then I guess, can you talk through the pieces of how you grow absolute dollar free cash flow in '25, given the pension headwind you have and how it compares to how quickly you can grow the segment EBIT. |
4,126 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Yes. So on CAS recovery, this year, we're a little bit under, say, $1.7 billion. We expect that to step down by -- in the range of about $100 million and probably stay at that level for the next few years after that. As far as absolute free cash flow in terms of the buildup and components to being able to continue grow, yes, we've talked about pension being a headwind. We've talked about being in the range of about $1 billion. The areas that we expect to drive cash flow growth would be continued earnings growth as you discussed their net income growth, in addition to some of these benefits and the timing on the F-35. We've talked also about just working capital in general. And even when you put F-35 aside, what we're looking at and going after is our contract asset. If you look here in the second quarter, that was a nearly $14 billion balance that we had net represented in a range and I'll put that in terms of efficiency around 70, 72 days of sales running through the balance at the moment. Since 2020 or so, that's grown from about 55 days. So there's an element of there kind of the F-35 and what we've gone through over the past couple of years here, but there's also been growth outside of the F-35 that represents a lot of opportunity for us to convert into faster billings at a level that we've been we've been able to demonstrate in the past. And that's what focused with on all of the business areas in terms of driving that on a multiyear basis back down to what we've been able to demonstrate. The next thing I'll say, so besides working capital and contract assets that are biggest opportunity is the reduction of payments related to the tax R&D capitalization. So we'll get in the range, I'd say, about $150 million of benefit just through lower payments there. So when you bring all these things together, we think that they generate a path to overcome what we're seeing in the pension and drive us to this target of low single digit. It's not easy. It's not a slam dunk, but we've got a path to be able to |
4,127 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | and drive us to this target of low single digit. It's not easy. It's not a slam dunk, but we've got a path to be able to do that, and that's what we're driving today to be able deliver next year and beyond. |
4,128 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: Thank you. The next question is from the line of Peter Arment from Baird. Please go ahead.
Peter Arment: Thanks. Good morning, everyone, Jim, Jay. Maybe just for you on the -- just talking about -- you've talked a lot about MSC's production ramp that you're going to have over the next couple of years. Just how does this all tie in with the collaborative agreements you got with Ryan Mittal [ph] now, PAC-3 production opening up in Poland and I think Jim also mentioned Spain, an agreement there. Just can you give us an update on PAC-3, what the growth kind of expansion looks like now and same, I guess, on some high HIMARS and JASSM, what some of those growth rates look like? Thanks.
Jay Malave: Sure. A lot of these agreements enable -- they're part of in-country requirements for industrial cooperation. You mentioned Poland, you mentioned Germany, also Australia. And those are enablers for us to build up this backlog and drive this demand. On the PAC-3 specifically, we expect to get to $550 million in 2025, and then to $650 million by 2027. And so all of these orders and these partnerships that we're signing up, while all enablers to us to be able produce and deliver at those rates. And it's not just PAC-3. We've talked about GMLRS going from 10,000 to 14,000. We've talked about Javelin going from 2000 to about 4,000. We've talked JASSM and LRASM going from about 700 a year to 1,100 a year, so all of these orders that we're seeing, all these customer engagements that we have both domestic and international are all enablers to drive to these rates that we're building to. And so what they do is fill in the bucket to bring us to that backlog that's necessary for us to generate those sales. And we're on track to that.
Operator: The next question comes from the line of Jason Gursky from Citi Research. Please go ahead. |
4,129 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from the line of Jason Gursky from Citi Research. Please go ahead.
Jason Gursky: Good morning everybody. Jim, I wanted to just throw a big picture one at you, and maybe have you kind of wrap all of this together and kind of what you're seeing both in the near and in the long-term? And maybe just get your sense of maybe with a few more quarters here of hindsight, some of the lessons learned from the conflict in Ukraine. What you at Lockheed have learned from that whether you're investing in any new areas as a result of that? And kind of the feedback loop that you're getting from your customer both here in the United States, as well some of our allied nations as well. Are we seeing a development of a new set of requirements and investment areas kind of where are you spending and how are you going about doing it? Just a big picture, here we are middle of 2024, what have we learned from Ukraine? And what are we doing? |
4,130 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: So Jason, I would say that there's a wide range of lessons from the Ukraine conflict unfortunately, as it is, but there's learning from it. One is that traditional system, if you will, like Javelin, at the initial invasion, made a significant contribution to the initial defense of Ukraine because it was a classic armor attack and armor-supported infantry attack, meaning there were armored vehicles that were spearheading the drive to Kiev. And when those vehicles got out in front of their support system that the Javelin, for example, made a tremendous difference in stopping that attack short, right? So, you have a traditional system that was designed for land warfare -- traditional land warfare, if you will, that was highly effective. So, we did learn from that. Now, there's jamming both ways, electronic warfare, there's cyber and it's like I tell my teams like your high school wrestling coach that for every move, there's a counter move. So, if you jam GPS, we tweak the system, either the satellite or the receiver or have an alternative form of navigation or targeting, and we react to that. So, on one hand, traditional systems are still effective. On the other hand, you have to be able to adapt quickly. I'd say that was the main lesson there. Another one, similar situation, PAC-3, again, decades in service. And now there's a hypersonic missile threat from Russia, which was launched on a number of occasions. I think all those occasions, none of those missiles were successfully reaching their target because the PAC-3 was modified to be able to address the hypersonic missile threat. And then we'll go to the kind of the other side of the issue, which is, okay, drones became a more important element of land warfare than it had been before, -- and in sea warfare actually, Ukrainians to sea -- autonomous sea vehicles to significant extent and success and also drones and unmanned aerial vehicles, too. So, this is not the first time. Those kinds of systems have been used in prior conflicts, including in the |
4,131 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | vehicles, too. So, this is not the first time. Those kinds of systems have been used in prior conflicts, including in the Middle East and the counterterrorism wars, if you will. But the Ukrainians took it to a new level, literally sinking capital shifts with unmanned aerial systems. So, there are lessons there, too. That's something our company is quite involved with a lot of is classified, whether it's kinetic or surveillance, unmanned aerial systems, but we're learning from those too. So, we work with drones as smallest ones that a marine can unpack from a backpack and launch by hand to aircraft size drones, if you will. So, we're involved in that game, and we did take the lessons from the Ukraine war. And that's traditional systems are still essential at bulk and scale. And secondly, they have to be much more adaptable than they ever had to be before. And that kind of supports our digital technology effort and campaign to say, let's use those best digital technologies to make those legacy systems better and better and all the time not wait for a conflict to force us to do that. |
4,132 | LMT | 2 | 2,024 | 2024-07-23 11:00:00 | Lockheed Martin Corporation | 285,827 | Maria Ricciardone: Great. Hey Lois, I think we've come to the top of the hour. So, I'll turn it back over to Jim for some final thoughts.
Jim Taiclet: Thanks Maria. So, before we close, I'd like to thank our Lockheed Martin team whose dedicated efforts to advance our customers' missions and propelled our solid results this quarter, as you heard from Jay. Our capabilities are recognized around the world as the best in defense tech. And that is thanks to our to our employees' hard work, dedication, and commitment to continued innovation. With 21st Century security technologies, I just described our robust backlog and focus on transforming our operations internal digital transformation program. Our company has a strong foundation for growth for years to come. So I look forward to speaking with you again on our next call in October, and Lois that concludes our call for today.
Operator: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect. |
4,133 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Operator: Good day, and welcome everyone to the Lockheed Martin First Quarter 2024 Earnings Results Conference Call. Today's call is being recorded. [Operator Instructions]. At this time for opening remarks and introductions, I would like to turn the call over to Maria Ricciardone, Vice President, Treasurer and Investor Relations. Please go ahead.
Maria Ricciardone: Thank you, Lois, and good morning. I'd like to welcome everyone to our first quarter 2024 earnings conference call. Joining me today on the call are Jim Taiclet, our Chairman, President and Chief Executive Officer; and Jay Malave, our Chief Financial Officer. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ materially from those projected in the forward-looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements. We posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non-GAAP measures that may be used in today's call. Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I'd like to turn the call over to Jim. |
4,134 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Thanks, Maria. Good morning, everyone, and thank you for joining us on our first quarter 2024 earnings call. I'd like to begin today's discussion with a brief overview of our quarterly financial results, the state of the U.S. Department of Defense budget, status updates on some key programs, and recent advancements made to support our vision of 21st Century security that integrates the latest digital technologies. Then Jay and Maria will provide more detailed information about quarterly highlights and financials. The increasingly unstable geopolitical environment in the world today makes it essential for industry and government to strengthen our nation's capabilities to deter and defend against further aggressive behavior against the U.S. and our allies. We here at Lockheed Martin are continuing to invest heavily to improve our design and production capabilities, while actively partnering with leading companies inside and outside the A&D industry to incorporate a wide range of technologies. As a result, we delivered robust revenue growth across the company, and we maintained a robust backlog of $159 billion, reflecting alignment between our advanced technology solutions and our customers' key missions and priorities. These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we shared in the most recent earnings call. Moreover, the approved FY2024 defense budget reflected many positives for Lockheed Martin, consistent with national defense strategy priorities too. Highlights include robust funding for munitions multi-year procurement, continued investment in hypersonics and classified activities, and ongoing support for programs such as Black Hawk, CH-53K heavy lift helicopter, the fleet ballistic missile, C-130, and F-35. There were also additions to the original budget submission, including F-35 aircraft, C-130, and combat rescue helicopters. The initial budget request for FY2025, while still very early in the process, continues support of |
4,135 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | combat rescue helicopters. The initial budget request for FY2025, while still very early in the process, continues support of many of these same major programs, including the F-35, CH-53K, UH-60M and others. In addition to emphasis on advanced munitions programs such as JASSM, LRASM, PrSM, Javelin, Daimler, and PAC-3, as well as hypersonic conventional prompt strike and the long range hypersonic weapon. In addition to that, next-generation interceptor is getting support, which I'll address more in a moment. In this week, funding of $95 billion for Ukraine, Israel and Indo-Pacific security supplementals passed the House and is currently under consideration in the Senate. We expect FY2025 Presidential Budget request and additive supplemental funding will provide a strong underpinning for future growth over the next several years for our company, giving us further confidence in our long range plan. While demand for these key programs remains elevated, it is also essential that our program performance in terms of quality, safety, cost and schedule gets and stays at the highest level. On our most significant programs, I, Jay, and my senior executive team are personally and directly involved. On F-35, we remain focused on program execution in terms of concurrent development, production and sustainment, and we are bringing all relevant resources across our company and collaborating closely with our customers and suppliers to fully implement the TR-3 capabilities that everybody is looking forward to getting. These capabilities based on the new core processor, data storage unit, and pilot display will ensure that the F-35 is not only the most capable and effective fighter aircraft in the world, but it will also further advance its abilities to act as the air domain quarterback of joint all domain operations for the U.S. and its allies. We're encouraged by the solid progress made over the last few months towards resuming deliveries, including improvement in aircraft mission system capabilities and system stability as we |
4,136 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | months towards resuming deliveries, including improvement in aircraft mission system capabilities and system stability as we advance from prior software versions towards a combat training capable configuration. Flight testing of this configuration is now underway and we're on a path we expect to be on with regard to maturing the system with approximately 95% of TR-3 capabilities in this flight test program. The test results to-date support our expected timeline of delivering the first TR-3 combat training capable aircraft in the third quarter and then transition to a fully combat capable aircraft in 2025. As planned, there will be continual software updates to support further capability insertions over the Block 4 program and beyond. While there were no final deliveries of F-35 jets in the first quarter, we're maintaining our production rate and continue to expect an aircraft delivery range for 2024 between 75 and 110, which requires timely receipt of the necessary hardware from TR-3 suppliers along the way. The F-35's advanced combat and interoperability capabilities continue to create strong demand for the aircraft internationally too. In the quarter, the Czech Republic became the 18th nation to join the F-35 global team with a signed letter of offer and acceptance, making it official its intent to procure 24 F-35s. In addition, the U.S. State Department approved a potential foreign military sale to Greece for up to 40 F-35s. And Singapore announced its intent to purchase eight F-35As to complement the 12 F-35Bs to which it has already previously committed. Also in the lower air domain, while we're disappointed in the cancellation of the Future Attack Reconnaissance Aircraft program or FARA, Sikorsky remains committed to delivering innovative and reliable aviation capabilities to our domestic and global customers. With a strong foundation of more than $20 billion in backlog, bolstered by expected and funded growth in the heavy lift CH-53K helicopter program, Sikorsky’s multi-year outlook is stable. We're also |
4,137 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | by expected and funded growth in the heavy lift CH-53K helicopter program, Sikorsky’s multi-year outlook is stable. We're also encouraged by the army's renewed commitment to Black Hawk production and modernization, as well as our ability to address mission gaps with capability upgrades that leverage Lockheed Martin's broad portfolio of solutions in the lower air domain, things such as autonomy, AI, et cetera. Turning now to missile defense missions, which given recent world events are becoming more critical than ever. We continue to lead the industry. Last week, the missile defense agency or MDA selected Lockheed Martin to deliver the new homeland missile defense capability for the United States, which is called the next-generation interceptor or NGI. As the MDA's NGI prime contractor, Lockheed Martin will provide the most modern, reliable and technically advanced interceptor in the history of this system. This program was a 1LMX that's our digital transformation worn digital program meaning we embrace model-based engineering, digital tools, processes and technologies from the very, very start of this program. Now, as it continues on its path to the critical design review, integration with broader weapons system and flight tests, I'm proud of the Lockheed Martin team that enabled all of this. We were MDA's early down select before it was even on their schedule because we're so far in front to get this essential homeland defense capability off to a fast start. Earlier this quarter, the Long Range Discrimination Radar or LRDR, completed final acceptance and was officially handed over to the Missile Defense Agency in preparation for an operational capability baseline decision. And what that means is final transition to active service for that radar to help defend the country. The LRDR is a cutting edge national asset providing the benefits of both low and high frequency radars to search, track, and discriminate incoming missiles with an open system approach, enabling the customer to add incremental capabilities |
4,138 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | track, and discriminate incoming missiles with an open system approach, enabling the customer to add incremental capabilities such as hypersonic defense. This is located up in Alaska, in the prime location, where we can sense early what any attack might look like and respond to it. What that really does, though, is create an elevated deterrence to any kind of attack like that. So it's really great to have LRDR about ready to go online. Now, both NGI and LRDR will be critical elements within the overall homeland defense mission, and they're going to be integrated into the broader defense architecture with a battle management system that we call command control, battle management and communications, or as the military calls it, C2BMC. So that's the system that's going to be used to integrate the radars, the missiles, and allow us to defend the country. In April, Lockheed Martin was selected for a potential 10-year, $4 billion follow-on C2BMC next-generation contract with the MDA, demonstrating again our leadership position and battle management systems for homeland defense. Under this contract, we'll continue to modernize and expand the system's capabilities to enhance global integration, improve space domain awareness, and optimize sensor connectivity and data fusion to levels never done before. All of which will create the most complete picture of these incoming threats as I just spoke about a minute ago. Separately, we also continue to advance our 21st Century security solution through collaboration with strategic commercial partners across the tech, telecom, microprocessor, and other industries to support the national defense. Citing just one example, we announced Lockheed Martin will work with Intel to support the simulated transition for Advanced Microelectronics Packaging or STAMP program for the office of the Under Secretary of Defense for Research and Engineering. This CHIPS Act related collaboration will provide a revolutionary leap in defense systems capabilities using high performance U.S. built |
4,139 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Act related collaboration will provide a revolutionary leap in defense systems capabilities using high performance U.S. built semiconductors. Over the next 18 months, we'll integrate our latest sensor open system architecture technology with Intel semiconductors with the intent to ultimately implement, test and complete production through the U.S. Navy's Lockheed Martin MH-60 Romeo helicopter program. I'll now turn it over to Jay for more highlights and some additional commentary on our financial results. Jay? |
4,140 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Thanks, Jim. I'll cover the consolidated results and touch on some additional highlights before handing it off to Maria, who will discuss the quarterly financials by business area, and then I'll come back to discuss the outlook and close out the remarks. Starting with chart four, we had a strong start to the year. First quarter sales of $17.2 billion increased 14% year-over-year, led by MFC and RMS. While the results benefited from an extra calendar week compared to 2023, normalized year-over-year sales growth was a solid 5%. We saw strong labor and material throughput indicative of an improving supply chain. We'll continue to work closely with our supply chain partners to enhance quality and performance proactively and, as needed, expand the breadth and depth of our engagement at supplier locations. Segment operating profit of $1.7 billion was up 4% year-over-year with margins of 10.1%, and included the anticipated $100 million reach-forward loss associated with the classified missile program at MFC. Excluding this charge, Lockheed Martin segment margins were 10.7%, primarily reflecting year-over-year lower profit adjustments. GAAP earnings per share of $6.39 were down 3% as year-over-year benefits from higher profit and lower share count were more than offset by higher interest expense, lower pension income, and mark-to-market gains. Book-to-bill in the first quarter was just below one. Notably, space booked several large national security orders in the quarter, including SDA tracking layer and other significant classified awards, contributing to a book-to-bill ratio of 1.8 and record backlog of $33 billion at space. We generated $1.3 billion of free cash flow in the quarter after investing $360 million in research and development and $380 million in capital expenditures. Share repurchases were $1 billion and we returned $780 million through our dividend. Shifting over to additional highlights in the quarter. We are pleased with the progress we are making on the F-16 program. The first three F-16 |
4,141 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | additional highlights in the quarter. We are pleased with the progress we are making on the F-16 program. The first three F-16 Block 70 jets varied from Greenville, South Carolina to Bahrain in March. To-date, Lockheed Martin has produced five F-16 Block 70 jets for Bahrain with additional 11 in various stages of production and testing. We also presented the first two F-16 Block 70 aircraft to Slovakia's Deputy Prime Minister and Minister of Defense, underscoring the deepening partnership between the two countries. In addition, the State Department notified Congress of authorization of the sale of 40 F-16s and related upgrades and support to Turkey. The latest deal builds on our long relationship and history with the Turkish Air Force. We are confident the F-16 Block 70 and Viper upgrade package provide advanced 21st Century security capabilities with affordable operating and lifecycle costs for Turkey. We also continue to upgrade our weapon systems for longer range standoff capability. In February in the U.S., the extended range ER variant of GMLRS guided multiple launch rocket system achieved success in its first operational test. The U.S. army fired two unitary warhead ER GMLRS variants with a HIMARS launcher, demonstrating precision and advancing this capability closer to production. The U.S. army almost awarded Lockheed Martin the fourth production contract for early operating capability precision strike missiles known as PrSM. This award will allow for a significant increase in production quantities to meet army demand for long range surface missiles. And the hypersonics, following the recent end-to-end flight test, we completed the test program of the Air-launched Rapid Response Weapon or ARRW with full confidence in its revolutionary capabilities. We have demonstrated successful all up round end-to-end performance on multiple occasions. ARRW provides the U.S. with the earliest air launch fully qualified production ready supersonic solution -- hypersonic solution, I'm sorry. And Lockheed Martin is |
4,142 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | air launch fully qualified production ready supersonic solution -- hypersonic solution, I'm sorry. And Lockheed Martin is prepared to quickly deliver additional tactical, operational and leave behind hypersonic strike assets that can be rapidly deployed to the U.S. military. We also continue to advance hypersonic strike capability in the land and sea domains through the Long-Range Hypersonic Weapon and Conventional Prompt Strike programs. Both solutions have a full year milestones ahead as we progress towards operational capability. Shifting the integrated air and missile defense arena the AEGIS Weapon System successfully executed one of the most complicated ballistic missile defense tests in the first quarter. When the system tracked and intercepted a medium range ballistic missile amidst multiple decoys. The test employed the latest updates to the system and demonstrates the reliability of AEGIS to operate in a dynamic threat environment and we're constantly evolving the AEGIS system. This quarter, we made further progress on our efforts to integrate with PAC-3 to enable an affordable, combat proven IAMD capability for maritime engagements and expand the mission capability of our systems. I'll pause here and let me turn it over to Maria to cover the business areas. |
4,143 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Maria Ricciardone: Okay. Thanks, Jay. Today, I will discuss first quarter year-over-year results for the business areas. Starting with aeronautics on chart five. First quarter sales at Aero were over $6.8 billion up 9% year-over-year, and that's 1% normalized for the extra week in 2024. The increase was primarily due to higher volumes across F-35 and Skunk Works and the continued production ramp on the F-16 program. Segment operating profit is comparable year-over-year with higher volume being offset by lower margin development contract mix and lower net profit adjustments, mainly on the F-35. Aeronautics backlog remains at a healthy $57 billion, which includes 373 F-35s and 80 C-130Js, and 132 F-16s, supporting growth into 2025 and beyond. Turning to Missiles and Fire Control on Chart 6, sales increased 25% from the prior year, 16% normalized for the extra week driven by production ramps on tactical and strike missile programs, primarily GMLRS, HIMARS and JASSM, LRASM. Integrated air and missile defense also saw higher volume on PAC-3 and THAAD. As expected, segment operating profit decreased 18% year-over-year, primarily due to the $100 million loss on the classified program Jay mentioned previously. Normalizing for the loss, MFC's margins would have been 13.7%. Now, I'd like to provide a quick update on our annual production capacity plans for key programs. PAC-3 is currently at 500 missiles, growing to 550 in 2025, and 650 by 2027. GMLRS currently is at 10,000 missiles, growing to 14,000 by 2025. JASSM, LRASM currently at about 650 missiles, growing to 1,100 by 2026, and HIMARS currently at 72 launchers, growing to 96 next year. Shifting to rotary emission systems on Chart 7. Sales increased 16% in the quarter, 8% normalized for the extra week, driven by higher volume across the entire portfolio, including radar and laser programs within integrated warfare systems and sensors, various programs within C6ISR and the CH-53K and Seahawk programs within Sikorsky. Operating profit increased 23% due to higher |
4,144 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | various programs within C6ISR and the CH-53K and Seahawk programs within Sikorsky. Operating profit increased 23% due to higher volume and favorable contract mix, partially offset by lower profit adjustments. Finally, with space on Chart 8, sales increased 10% year-over-year, 2% normalized for the extra week to approximately $3.3 billion. The growth was driven by higher volume on the fleet ballistic missile program and ramp ups on hypersonic and next-generation interceptor programs within strategic and missile defense, as well as higher volume on space development agency transport and tracking layer programs within national security space. Operating profit increased 16% compared to Q1 2023, driven by higher volume and ULA equity earnings, partially offset by lower net profit adjustments, primarily on the Next-Gen OPIR program. Now, I'll turn it back to Jay to wrap up our prepared remarks. |
4,145 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Thanks, Maria. Let's turn to the outlook on Chart 9. Our expectations for Lockheed Martin’s 2024 financial outlook remain unchanged from what we said in January. With the strong first quarter results positioning us well to achieve the consolidated full year outlook, we continue to expect free cash flow to be in the range of $6 billion to $6.3 billion, including over $3 billion of independent research and development and capital investments. While the dividend, along with the expected $4 billion of share repurchases, support our returns to shareholders, targeting a mid-single-digit free cash flow per share growth over the longer-term. All right. To close out and summarize on Chart 10, we're off to a solid start in 2024 and remain laser-focused on execution to our customer and programmatic commitments while building momentum towards delivering our full year guidance. Through our 1LMX transformation, we are reengineering our internal processes by providing the automations and capabilities needed to drive efficiency, increase velocity and enhance key captures and programs. 1LMX will enable us to combine the depth and breadth of our portfolio with the expertise and dedication of our people to drive 21st Century Security solutions for our customers and continue to create value for our shareholders. With that Lois, let's open up the call for Q&A.
Operator: Thank you. [Operator Instructions]. Our first question is from the line of Doug Harned from Bernstein. Please go ahead. |
4,146 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Doug Harned: I'd like to start to make sure we have a good understanding of the F-35 right now with TR-3. As you said, the Air Force has talked about this as well, and it looks like that timeline has moved back to some point in Q3. And there's just been a great deal of slippage in the timeline over the last few years. Block 4 has been delayed, and the new budget has cut deliveries in 2025 and 2026, ostensibly to avoid having to do later Block 4 upgrades. Now, you've been able to keep production and revenues up, although deliveries and cash payments are off. But how can we get confident in the trajectory? And perhaps, Jim, maybe you could talk about what a positive or more negative scenario might look like for production and deliveries over the next two years? And what it would mean for the revenue and cash trajectory? |
4,147 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Sure, Doug. So I think it's important to understand that we're doing, as I said earlier, concurrent development and production and then advancing the sustainment capability as well, all at the same time. Most of these complex programs go through a period of development and then a production run largely off of that design base or that engineered base of what the aircraft supposed to look like and how it's going to perform. The F-35 is different in a sense that development has been going on since the day the program started years and years ago, and it's going on today. Now, the good news about that is you have step function increases in capability every few years, and as a result of the F-35's capacity to do that, the government just came out and extended the expected service life of the aircraft another decade or two, I think it was. So this is a good thing, but it's also an extremely difficult thing to do and even to predict schedule, right? It's our responsibility to hold cost and schedule, but we're -- we don't control all the variables let me just say. And that's okay, we're still the OEM, we're still responsible. And so what we run into on TR-3 is just a level of complexity and executing the step function increase, that's pretty, I'd say, novel or dramatic. What the team is doing at our company is we're integrating a series of components, devices, software, and managing and integrating all of that. And so what's happening now is we are ringing out all of the software through all of the new hardware and integrating it into all the aircraft other systems. And that's taken longer than our team predicted. The way we're going to get at that is if you think of it as a release one and a release two, and we've got a lot of confidence in this stage. So release one, if you think of it that way is what we're calling along with the U.S. government, a combat training capable aircraft, meaning we can get these jets in the hands of squadron, wing, and regional commanders so that they can start training their |
4,148 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | meaning we can get these jets in the hands of squadron, wing, and regional commanders so that they can start training their pilots on them and training their maintenance organizations and also getting their bases and infrastructure, spare parts, pools and everything else sort of in operational shape, if you will. Once we get the final software load for the fully combat capable version of TR-3, sometime in the next few months, then those aircraft could be deployed into actual combat operations and you'll have the training, the maintenance, the ringing out, the operational patterns and procedures on how to actually fly the jet in combat. So we'd like to be able to do it sooner, but this is the schedule we're on. And I'd say for the combat training cable aircraft, we're highly confident, based on the test results so far, that those will be deliverable in the third quarter. Jay, you want to say anything else about cash flow and -- |
4,149 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Yes, sure. Doug, I'll just add, as Jim mentioned, this combat training capable -- capability and configuration, as Jim mentioned, supports the training of the squadrons standing up to new squadrons and decreasing the amount of time of the aircraft are parked. All that, what that does is really avoids any type of significant disruption. And so what this does is really keep our production on track here in 2024 and then beyond as well. As Jim mentioned, in 2025, we'll have further capability inserted and we'll actually start delivering on the inserting Block 4 type of capability as well. And you may have heard, you referenced comments made from the U.S. military and they discussed a Block 4 reimagined, and what that would entail is an insertion schedule that's really tied to an executable plan that can be provided by industry, so we can avoid these types of disruptions. And so when you look at it in the short-term, could there be pressure on the last 15 through 17 contract profitability and potential movement around in cash flow? Yes. But I think over the longer-term and the medium-term, I think we're working in coordination with our customer to make sure that we can deliver the capabilities the customer wants, but on an executable schedule. And if we're able to do that, then we should be able to keep the program on track from a production standpoint.
Operator: Thank you. Our next question is from Peter Strauss from Barclays. Please go ahead. I'm sorry, David. Okay, great.
David Strauss: Good morning. Yes, thanks.
Jim Taiclet: Good morning, David.
David Strauss: Good morning. Thanks for taking the question. So since Q4, we have a 2024 budget, looks like we're going to get a very large supplemental. You won NGI. How might all those things together change how you're thinking about where you kind of fall in, in the revenue guide this year and the potential for revenue growth in 2025 to accelerate kind of off this low-single-digit level? |
4,150 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: So David, as we mentioned, for this quarter, we started off pretty solid, just on an apples-to-apples basis 5% growth in the first quarter lines up pretty well with a mid-point guidance range, which is 2% to 2.5% and the high end of that range being, say, around 3.5%. So we're well-positioned to deliver on that expectation. It is possible somewhere to last year that we could see some upside towards the higher end of the sales guide range there. So again really good start that enables that. As we think about 2025, what you saw in the budget, what we're seeing here in supplemental, give us higher confidence that we'll continue to grow. We talked about growth in -- starting in 2023, a year earlier than we had originally anticipated, accelerating in 2024, and then giving us more confidence that we'll see at least a same if not more growth in 2025. We'll give you -- it later in the year, we'll give you a much better update in terms of what we're seeing. But right now all this bodes well to our sustained growth in terms of what we've been driving to, not only in 2025, but beyond 2025 as well.
Operator: And the next question is from the line of Peter Arment from Baird. Please go ahead.
Peter Arment: On missiles from fire control, can you talk maybe about the confidence in your margins -- margin guidance for the year? Just given the 1Q margin performance was certainly the lowest that we've seen in many years. And we know the classified losses are supposed to expect it to continue, but you've got kind of this reflecting top-line. I think Maria called out all the production increases and just do the losses just get smaller on the class side, or are we going to see some offsets just because of the higher volume? Maybe you just give more color on kind of your expectations on the margin performance profile going forward. Thanks. |
4,151 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Sure. Peter, MFC was a little light because of two factors. First, as we mentioned, we did have the $100 million loss provision that we recorded. In addition to that, their profit adjustments were lighter year-over-year by about $20 million. And so that's a function really of calendarization. We'll see profit adjustments in throughout the rest of the year improve. And so getting us back to what we had guided to. Just as a reminder, we're anticipating, and that was fully anticipated in our guidance for MFC, that we would have additional or could have additional losses in the back half of the year associated with this classified program. And so what our guide, what it implies from where we are today, we reported $100 million is in a range of another $225 million in the back half of the year, which would be provided for in this expectation. Now, going beyond that, we've talked about this, and I'll just deal with the question upfront in terms of can timing change? And it's possible that we could record additional losses here in 2024 depending on other factors as the year goes on, there's factors such as technical milestone achievement through the balance of the year, discussions with our customers, visibility to funding. So all of those factors go into the determination and whether you have to recognize a loss earlier. You'll see coming out in our 10-Q that we've actually ranged the potential losses on this program, which would be in excess, additional losses in excess of $1 billion. So at least you could have an opportunity to size it. The timing of which is still to be determined. We've got about $225 million at least embedded in our guide for the balance of the year. Going back to MFC for the year, if you really take apart their expectation, the impact of this at $325 million of losses in the year anticipated, they're offsetting a fair amount of that in their guide. I mean, the impact of that is 270 basis points alone. And their total full year guide is down about 210. And so you're seeing offsetting |
4,152 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | impact of that is 270 basis points alone. And their total full year guide is down about 210. And so you're seeing offsetting improvement within MFC, it's not entirely one-for-one, but their underlying performance has been solid and we expect that to continue. |
4,153 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: And Peter, it's Jim. I used to fly these aircraft for the USAF and I can assure you that the capability that's being developed here at MFC in the classified program will have very, very long legs. There's going to be many, many years, we believe, of orders to follow. So, yes, for a quarter, for the year, maybe for a couple of years, we're going to absorb the loss provisions that Jay described. But I think if you look under the curve for the lifecycle is going to be significantly positive. And so we want to get there as efficiently as we can. This is a long run franchise program that I think the U.S. government is going to support for a very long time.
Jay Malave: Right. I think it's important to keep that in mind that, we spend a lot of time talking about timing of losses and things like that and the magnitude of it, but we also spend a lot of time internally going through just where we are in the progress of the program as well as the business case. And I can assure you the business case is accretive to it at a above our cost of capital. And as Jim mentioned, it's going to provide strong returns for many years to come.
Operator: Our next question is from Matt Akers from Wells Fargo. Please go ahead.
Matt Akers: Yes. Hey guys, good morning. Thanks for the question.
Jim Taiclet: Good morning.
Matt Akers: I want to ask a couple on the Next-Gen Interceptor win, I guess one just how you were able to win. I think ahead of when the original down flight was expected and also whenever there's sort of a big contract like this, and we always get questions on potential charges because we've seen some of that happen in the industry. So just your confidence that you've got the cost there sort of size correctly. |
4,154 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: So the company made a beta about three years ago to say, okay, we've got a digital transformation program that is going to take the whole company to this model-based engineering system. And that's all the way from requirements acceptance from the government to sustainment years and years down the road. And we spoke this before; it's about a $6 billion, 8 to 10-year program to convert the entire company to a model-based engineering production sustainment operation. NGI was one of the pathfinder programs picked to implement this because there's no legacy to convert, right. There's no old blueprints to try to figure out how to make three dimensional, which is something, by the way, we are doing for C-130 and other programs right now. But we could get off to the fast start on NGI because it was in this born digital category. Right from the proposal, we were using these digital technologies, 3D, CAD and everything else, and sharing data with the government in that fashion, and they were able to receive it. And we could thereby accelerate the schedule and contain the cost of the development and ultimately of the production too, by using these tools. There were three original players in this. One dropped out fairly early. The second was in kind of this final phase, if you will, of down select. And we were -- we just ready to go and provided our proposal ahead of schedule. The other player, to my knowledge, provided a proposal also. And then the government was able to make a decision based on that. But I think because of our speed and our ability to demonstrate manageable cost over time, we won, and kind of won early, if you will. I'll let Jay talk more about financials, but what I can assure you is the process of this bid did not require us to dive to the bottom on cost. So Jay, do you want to take it from there? |
4,155 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Sure. Just a -- we're currently performing already under a contract, and that contract will continue. We've talked about this before. We've completed a preliminary design review in September of 2023. And we're on track for critical design review in 2025 and under the current contract as well as building test assets. So that will just continue under this down select. As far as pricing and costs, the current contract, because of development contracts, cost plus contract, it's low margin as you would expect, but nothing again abnormal. As far as future bidding that we provided for future types of contracts, there were various elements or different types of contract structures that the customer asked for. We provided those to the customer, none of which was based on aggressive pricing or bidding, as Jim mentioned. We've talked about this in the past, and we've taken a middle-of-the-road approach to our pricing, and this is no different.
Operator: Thank you. The next question is from Ron Epstein from Bank of America. Please go ahead.
Ron Epstein: With FARA off the table, and it looks like the flyer program has decent support, how are you thinking about the outlook for the vertical lift business? Where could we see some upside? What other competitions are out there? And how should we think about that? |
4,156 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Yes. So Ron, this is Jim here. As we kind of roll into the 21st Century, what our company is trying to do is not just look at things through the programmatic lens or I'll call it vertical kind of column but also horizontally through the actual mission and figure out what technologies can accomplish the mission that will enable our core basic platforms to be successful as well. And that's how we're looking at the rotary business. It's not just at Sikorsky anymore. It is Sikorsky plus all of Lockheed Martin, right? And that's one of the reasons we're able to work with U.S. Army, Congress and the broader U.S. government to increase support for, let's say, Black Hawk, for example, in spite of the fact that FARA is being canceled and there's another vertical lift program in the form of FLRAA, which is going to be a tilt rotor. So there are missions that the Black Hawk will be extremely well suited for in the rotary lower -- it's really the lower air domain. It's not just for rotorcraft. So how do we pair those rotorcraft, a traditional Black Hawk, let's call it, by modernizing the Black Hawk with digital technology to do what the Air Force would call CCA, collaborative combat aircraft, meaning you can in the lower air domain tie drones and unmanned, uncrewed aircraft to a Black Hawk using digital technology, and we've demonstrated that already. You can actually make the Black Hawk itself autonomous with no pilots in it being flown from a command center to do high-risk missions. So we're looking at the mission and saying, what can we do all across Lockheed Martin, whether it's through sensor fusion, AI, 5G, space-based sensor assets to make the Black Hawk, for example, a much longer lived platform, a much more relevant platform and actually a very efficient platform compared to, say, the FARA aircraft that won't be able to do some of the missions anyway. So we have a strong confidence then in Sikorsky itself and the platforms that it does produce. And that includes CH-53K, which I mentioned the Seahawk, |
4,157 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | then in Sikorsky itself and the platforms that it does produce. And that includes CH-53K, which I mentioned the Seahawk, which is a Black Hawk that's configured for maritime operations that is pretty high tech as well. And so we feel really solid, as I think Jay said in his remarks, on Sikorsky's future with a backlog of $20 billion and the ability to modernize these really reliable in production aircraft to do new things and with missions in digital technology and other -- and integrate with other parts of LM and our partners to make those platforms relevant in the future. So I'll stop there. Jay, you have anything else you want to say? |
4,158 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Sure. Just a couple of things, as Jim mentioned. A stable outlook is the best way to describe it. As Jim mentioned, CH-53K is really the pillar. And those revenues between now and 2027 and 2028 are going to double. And so while we will see declines in other programs such as combat rescue helicopter, some declines on Black Hawk and others, the CH-53K will really offset all of those declines. We do have to go through a rebalance, a little bit of a rebalance of the workforce because the mix of development work versus production work is different than what we had originally anticipated. So we'll go through that. But I think the business, as I mentioned, will be -- is pretty stable. We're also, as Jim mentioned, continue to have dialogue and just investments in Black Hawk modernization, which will maintain its relevancy particularly in the JADC2 environment. And so, of course, you continue to see opportunities for not only the base missions that Black Hawk performs but other missions as well. Those dialogues are ongoing with the army to determine what would be the best fit for those. And so as I mentioned, from a revenue standpoint over the next five years, it will actually go up over the next few years a little bit, come back down, but pretty much flat to where it is today. And so stability, I think, is the best way to describe it.
Operator: The next question is from Rob Spingarn from Melius Research. Please go ahead.
Rob Spingarn: If we put the impact of TR-3 to the side, on the last call, you underscored the importance of the supply chain in producing F-35s at a rate of 156. And one of the things that's made the F-35 program so well supported by Congress and international countries is the breadth of the supply chain. But is the complexity and scale of the supply chain limiting the potential and affordability of the program? And on future fighter aircraft programs, whether it be NGAT or FAXX, might we expect Lockheed to do more of the work in-house, the production work in-house when compared to F-35? |
4,159 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: So it's a great topic, Rob. And so let's start with the origination of the F-35 program. It was intended, as you said, to be a wide-based Allied program. I think it was seven literally partners, essentially treaty partners that we all get together and contribute their industrial capacity and their financial capacity to this program, given its importance and complexity and the scale that people are contemplating. So yes, we have a pretty broad supply chain. There were a couple of times when that's gotten a little tough for the program. COVID was one of those. So we had delayed deliveries out of the UK, because the factories there weren't open, although ours were. So we will be mitigating any future programs that we have. And we're eager to have international production and sustainment partners, and we're going to expand that. But we're also going to apply some anti-fragility methodologies to those initiatives going forward. No one really thought of COVID, of course. But now that we've had that example, we need to know -- we know we need to have second and maybe third sources. And geographic diversity would be a positive thing from that perspective. So we'll just be a little more broadly thoughtful about how we do this. Having single sources outside the U.S. is probably not the best idea. There's an affordability issue around that too. So we're just going to have to balance everything out. So based on its origination and essentially the commitment of the countries to the program, we do have that sort of spread out supply chain with a couple of weak spots in it. Look, another weak spot's canopies, right? How hard is it to make a glass canopy? Well, with this kind of stress and the kind of precision that's needed and put in an F-35 canopy together versus an F-4, which I used to look out a little bit. Highly complex, hard to produce, single source, one of the big degraders that we have. So again, we're going to learn from that, whether it's a domestic or an international supplier going forward. In |
4,160 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | that we have. So again, we're going to learn from that, whether it's a domestic or an international supplier going forward. In addition, as you pointed out, we are heavily in-sourcing when we can, and Lockheed Martin has the best technology. We're looking hard at making sure that we can control as much of the supply chain that is feasible and reasonable based on whatever program it is. And so, for example, on NGI, that was at MFC, Lockheed Martin Space collaboration to make sure that the most critical sensor components that we could produce in the company effectively and efficiently were the ones that were selected, okay? And so your topic is a really great one. We intend to actually geographically further diversify our supply chain but really based on this anti-fragility concept of having two or three sources, either different parts of the world, different companies, different logistical chains, things like that where we won't run into some supply chain issues as much as we have on some prior programs, including F-35, honestly, so. |
4,161 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Operator: Next question is from Rob Stallard from Vertical Research. Please go ahead.
Rob Stallard: Jim, last quarter, you had some comments on contract structures and the way perhaps your customers have been dealing with defense industry in recent years. I was wondering if there's been any sort of resonance from your commentary and any willingness, early willingness from the customer to look at this in a fresh way. |
4,162 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: So let me focus on digital service contracting because I think that's a really ripe opportunity area for the DoD to work with industry, not just the traditional defense fronts, if you will, but broader industry too. We want to play on subscription basis ourselves. We want to bring in partners that will only be our suppliers on a subscription basis. So in terms of, say, 5G, connectivity services, backhaul, those kinds of things, AI, which needs constant refreshing and modeling. We will do a lot of the AI in-house, but we're not going to be possible to do all of it. We want to bring in partners. We announced a couple of them like NVIDIA and IBM. They want to work with us. So I do think we're starting to get interest inside government on how to do this. We proposed, frankly, ourselves, which will open up opportunity for a lot of other companies in different sectors an adjacent acquisition process within the DoD for digital services alongside the traditional DoD acquisition process for largely physical goods like aircraft, ships, et cetera. There's interest in that. We haven't gotten it over the line, so to speak. But I think there's a lot of advocacy across broad industry to do that and starting to be in Congress and other places in DoD as well. Along with that, we want to drive an open architecture system so that U.S. government has a lot of diversity in its potential suppliers because we're all working off of the same standards base as far as APIs, interfaces, frequencies, use and those kinds of things and synchronize that as much as we can with commercial industry so we can use more of their IP and more of their resources and more of their people. So I think that there's a lot of opportunity here, and we're getting -- starting to get some traction on it. But it's going to take a little bit of time to get those processes and those standards bodies put in place. But we're actually on it, and we have some partners and teammates agree with those. |
4,163 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: I'll just add, Rob, we have seen some changes where the contract structure is more closely aligned with the capability that's being requested and the assessment of the technology maturation of that capability. And so you're not seeing as many of these kind of high-risk fixed-price development contracts that really don't work well for anybody because they don't optimize a solution, and they typically end up poorly for the contractor. And so we have seen those changes. Again, they're case-by-case. But I can tell you that at least what we're seeing, particularly in the higher risk, higher technology-type risk arenas, we are seeing a shift in contracting to contracting vehicles that are just more relevant to those circumstances.
Jim Taiclet: Yes. And Rob, maybe to support just another minute what Jay is speaking about in a more direct way here. I have a view, as you may have heard, that having a -- even a cost-based development project or program with a fixed price set of early production options is a tough thing to intellectually get at least my arms around, which is committing to cost and price on an object that really hasn't been fully invented yet. And we're looking really, really hard if that's -- in any opportunity that's presented to us in that context as a company. So that is one area where to, again, highlight what Jay is speaking about, more of an alignment of what can industry deliver on a reasonable risk basis. And so the government can get a successful program out of it, frankly, and not have massive write-offs in industry or cost overruns or long schedule delays. We think it's constructive to get some more of that alignment that Jay described.
Operator: Our next question is from George Shapiro from Shapiro Research. Please go ahead. |
4,164 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Operator: Our next question is from George Shapiro from Shapiro Research. Please go ahead.
George Shapiro: Yes. Good morning. A couple of quick one's for you, Jay. If the first quarter normalized growth was 5%, and even at the high end, you're looking for 3.5%. So will this be the fastest-growing quarter? And what slows down and obviously normalizing for the fourth quarter? And then, the second question is the guide for other net was $400 million. First quarter is only negative 61. So I was expecting you might lower that number for the year. And so what was the reason why you didn't lower it? Thanks.
Jim Taiclet: Jay?
Jay Malave: All right, George. Thank you. On the quarterly profile for sales, as you mentioned, on a normalized basis, 5% growth here in the first quarter. I'd see it will slow down to low-single-digit in the second and third. And we're thinking that the fourth quarter probably flattish to maybe slightly down. You might recall that the fourth quarter of 2023 ended up being stronger than we were originally expecting. And so our compare in the fourth quarter of this year would be a little bit tougher. And so you're talking in second and third quarters probably 2% to 3% type of growth numbers with a flattish year-over-year in the fourth quarter. As far as other net, George, you got me there. There's probably some opportunity in there. We'll calibrate that, and we'll update the guide in the second quarter for the full year. But it's probably more prudent to just wait till we're halfway through the year and just make an assessment of the entire outlook, and we'll just leave it there.
Operator: And our next question is from Noah Poponak from Goldman Sachs. Please go ahead. |
4,165 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Operator: And our next question is from Noah Poponak from Goldman Sachs. Please go ahead.
Noah Poponak: You talked about Pentagon terms of trade and contract structure here, and you mentioned NGI as cost plus development. But you also mentioned they asked for -- to kind of see multiple contract structures. Curious what they asked to see, where you landed on those maybe interim windows between development and production. And then, Jay, the loss-making classified program in MFC, what year do you expect that to be profitable on an annual basis? And just to confirm, there's one program in that position, correct, not more than one?
Jay Malave: Yes, that's correct, Noah, just one program. And I think right now, our outlook would say probably in -- if you're -- probably 2028 is where we would expect that to flip to positive. Again, it's a question of the timing of the recognition of the losses, but if you assume kind of more linear approach from here on out to be about 2028. As far as NGI, just again, the different contracting vehicles are ranging anywhere from cost plus to fixed price incentive. There is no -- the customer hasn't selected exactly which vehicle wants to pursue. So there's nothing actually under contract for the next phase or phases. Right now, we're going to continue to perform under the current contract, as I mentioned. We got critical design review in 2025. We also, as part of this contract, we have to provide some test assets. And between now and then, I'm sure we'll have discussions in terms of getting future phases on contract. |
4,166 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Yes. And Noah, the principle behind what Jay and I are speaking to here is that we want to be agnostic ultimately from a risk-adjusted basis on whatever contract format that the government would like to employ in these matters. So if it's going to be any kind of, I'll say, a highest risk would be again, fixed price production on something that's not been designed yet. We will put a high risk premium in the future and have on those kinds of requests of the government. And what's interesting is they're asking for multiple types on NGI. And that's going to give them an opportunity to see what contract risk transfer to industry is now going to cost, at least in Lockheed Martin's case because we will reply on that basis to say, if you want us to have this kind of contract, we have to have a risk premium that's significantly higher than, let's just say, a pure cost-based contract to give you the greatest contrast. And that's just the principle we're going to use from now on. So if you want a certain price point as government, we will provide you a contract format that will get you that price. But if you want to shift more risk to industry, you'll see a higher risk premium come back in our proposal, if you will. So that's the principle we're using and that we'll continue to use.
Maria Ricciardone: Lois, I think we have time for one more question since we're close to the top of the hour. So let's take one more, and then we'll be done.
Operator: Thank you. And next question will come from Rich Safran from Seaport Research Partners. Please go ahead.
Rich Safran: Good morning, thanks. Two-part -- quick two-part question on C2BMC. I want to know if you could discuss the P&L impact in terms of timing and margins. Second and more broadly, I thought you might discuss a bit about how this fits with the -- with your strategy for pulling in mission-centric programs and what the opportunity set there is? |
4,167 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jay Malave: Okay. For timing, we're -- we've been under contract. This is a follow-on for us. And what I could do, Rich is I don't recall off-hand exactly what the annual revenues are, but I got Maria follow-up on you. But this is, again, just a continuation of those activities there. And so no significant change I don't think from a revenue standpoint or margin expectation at RMS for this. |
4,168 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: And so from the mission-centric approach, this is actually a pretty good example of that, Rich, in pulling through or extending existing programs, right? And so we're trying to show is that you can map data flows through a full mission, right, which generally includes and now cyber, by the way, upfront. So you have a cyber-track, then you have to have a sensing capability. You then have to have a way to get sensor data, whether it comes from a satellite or a submarine back into the command and control system. Along with that, you have to have targeting and tracking quality data that comes from beyond just the sensing of an object that's a target. You have to be able to track the target in a way that you can then guide a projectile to it and take it out or put a cyber-attack against it or laser or whatever the effector will be. And so the term of art for that is not pretty. It's called a kill chain. We want to put these chains together in diverse ways that are, again, anti-fragile, which means if you take out one link in that chain, you don't eliminate your ability to complete the mission. And so that's where we're looking at data flows in addition to physical flows, if you will, right? And if we can help create an open architecture system that can provide multiple routes of data flows that can affect missions, then we will be able to have a head start on our platforms and designing to those. And that's what we're doing with Black Hawk for example. That's what we're doing using the C2BMC system. The LRDR radar and ultimately, the NGI missile will be based on a similar architecture. We'd like that architecture to be common outside of Lockheed Martin as well as inside because that will open up more suppliers to us and also provide the government more competitive options. So this is all coming together, and I'm kind of glad you asked the question here at the end because it's very intentional. |
4,169 | LMT | 1 | 2,024 | 2024-04-23 10:15:00 | Lockheed Martin Corporation | 285,827 | Jim Taiclet: Okay. Thanks, Maria. Thanks, everybody, on the call. I want to also express my appreciation to everybody at Lockheed Martin for their relentless focus on this operational execution I mentioned, driving innovation and excellence. And we're all doing this in support of our customers. That's the reason. We have a vision for 21st Century security that we think will keep deterrence high in an increasingly complex and threatening global environment. As a company, we have a strong backlog, as you heard. We're driving operating discipline across the whole organization and this continuous improvement mindset we have. So all that's designed to position our company for U.S. shareholders for future growth and attractive and reliable returns to shareholders over a long period of time. So thank you all again for joining us today, and we look forward to speaking with you on our next earnings call in July. Lois that concludes our call. Thanks.
Operator: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect. |
4,170 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: Lockheed Martin Corporation first quarter 2025 earnings results conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Maria Ricciardone, Vice President Treasurer and Investor Relations. Please go ahead.
Maria Ricciardone: Thank you, Sarah, and good morning. I'd like to welcome everyone to our first quarter 2025 earnings conference call. Joining me today on the call are James Taiclet, our Chairman, President, and Chief Executive Officer, and Evan Scott, our Chief Financial Officer. Statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements. We have posted charts on our website today that we plan to address during the call. To supplement our comments, these charts also include information regarding non-GAAP measures that may be used in today's call. Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I will turn the call over to Jim. |
4,171 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Thanks, Maria. Good morning, everyone, and thank you for joining us on our first quarter 2025 earnings call. You saw in the press release this morning, Lockheed Martin Corporation delivered strong all-around performance in the first quarter, continuing the growth momentum we've seen over the last two years. We increased our year-over-year sales 4% in the quarter and generated solid cash and enabled investment of $850 million in independent research and development and capital expenditures. Moreover, we provided a robust shareholder return of $1.5 billion through dividends and share repurchases during the quarter. As Evan will discuss in a moment, these results reinforce our confidence in our full-year guidance of mid-single-digit growth in sales, 11% segment operating margin, and double-digit growth in free cash flow per share. Our strong start in Q1 enables us to mitigate or absorb currently known tariff headwinds, as well as the direct program impacts of the Next Generation Air Dominance program decision. We maintain our original guidance for the full year. With respect to the U.S. Defense budget, we continue to operate under a full year continuing resolution that allows for new awards and the transfer of funds across programs. And we are actively engaged with our customers to provide best-value solutions to them in this process. We're applying this best-value approach also to our customer interactions regarding the 2026 presidential budget request as well. This is especially applicable to the president's high-priority launch of the Golden Dome for America, where we are describing how current Lockheed Martin Corporation programs that are already at scaled production can contribute immediately to the solution. Our Twenty-First Century Security Strategy, where we integrate existing and new satellites, aircraft, ships, missile launchers, and command and control systems with constantly upgradeable digital technologies, was tailor-made for Golden Dome. In addition to the significant opportunities |
4,172 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | with constantly upgradeable digital technologies, was tailor-made for Golden Dome. In addition to the significant opportunities presented by this project, we have recently won several large missile program awards in the first quarter already comprising up to $10 billion in future work. These include substantial contracts for precision strike missiles (PRISM), Terminal High Altitude Area Defense (THAAD), and joint air-to-surface standoff missiles and long-range anti-ship missiles. These are among the most sophisticated and effective guided missile systems in the world and are continuously proving themselves in actual combat operations. Lockheed Martin Corporation Space also received a modification to their existing contract for next-generation U.S. Deterrents at sea. The upgraded missile, often referred to as the Fleet Ballistic Missile, is called the Trident II D5 Life Extension. Lockheed Martin Corporation has provided this critical proven deterrence capability for 70 years, and this award launches the technology refresh that will continue this franchise for decades into the future. Beyond missiles, our space team recently won a contract on a classified program in which we will demonstrate highly advanced capabilities and the latest cutting-edge technologies available. We've proven these new capabilities on orbit and are ready to produce these vehicles at scale right now. This is another example of our ability to apply the latest technology at a level of reliability that can quickly improve the ability to deter arm conflict and win it if need be. We also received the contract to integrate a system of next-generation infrared sensors on the F-22 Raptor to enhance the aircraft's survivability and lethality. As a former Air Force pilot, I can provide strong assurance that this new capability will further enable the fifth-generation F-22 to shoot down enemy aircraft before they even know that we're there. Equally notable in the quarter, and another example of developing on the leading edge of evolving requirements, |
4,173 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | we're there. Equally notable in the quarter, and another example of developing on the leading edge of evolving requirements, was our demonstration of cost-effective countermeasures against drone warfare. Complementing our existing systems for integrated air and missile defense, by leveraging sophisticated electronic warfare techniques to find and destroy swarms of dump drones. Our team conducted the first in a series of innovative demos featuring a system designed to detect track, identify, and defeat a mix of small drones cost-effectively, driving another value-based solution for our customers. And in another first-of-its-kind real-world demonstration, our Skunk Works team joined with the Royal Netherlands Air Force to showcase the first-ever live classified data share outside the United States between an F-35 in flight and a Dutch command and control system during a multinational military exercise. This is a first and a significant step forward in using digital technology for the integration of ground, air, and naval forces, with the F-35 serving as the quarterback between several allied nations in real-time. Speaking of next-generation technologies, I think it's important to highlight that over the past few years, we've pivoted our long-term strategy to transcend any individual program and provide cost-effective solutions by combining our installed base of highly capable hardware with AI 5G, distributed cloud and the like. For example, the air superiority mission is being done today with a host of aircraft and other systems. Many of which you all know are made by Lockheed Martin Corporation. In a combination needed to defeat even more aggressive and sophisticated adversaries, thereby deterring them from initiating a hostile action. This mission solution orientation that we call Twenty-First Century Security is designed to extend the life and capabilities of our existing platforms like the F-16, F-35, and F-22 in an ever-increasing threat environment in a manner that's affordable to the U.S. and its allies. |
4,174 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | the F-16, F-35, and F-22 in an ever-increasing threat environment in a manner that's affordable to the U.S. and its allies. While integrating new platforms such as NGAD into the mission fabric over time. Lockheed Martin Corporation's broad R&D portfolio exclusively positions us to make this a reality. Our next-generation air dominance efforts advance many classified technologies that were aligned to this strategy. And we plan on applying those technologies to our current systems making our already proven products even more relevant to the future. As well as enhancing the capabilities we provide in ongoing and future development. For example, the knowledge and technology development gained from our investments in the NGAD competition strengthened our conviction, to enhance the F-35 to a fifth-generation-plus capability, and I challenged the team to deliver 80% of sixth-gen capability at 50% of the cost. In support of this vision, we're also committing to drive disruptive innovation and building upon our recently established internal capabilities in AI autonomy, crewed-uncrewed teaming, and command and control systems across the whole company. We have aligned these technology investments with our customer priorities and demonstrated meaningful increases in capabilities at relatively low cost. We've already shown the networking and teaming ability of the F-35 and the F-22 to control uncrewed vehicle systems like drone wingmen through onboard deployments of our autonomy solutions on real aircraft. Our Skunk Works team has also invented a ground and sea-based drone command station powered by our operational autonomy platform which is currently in production today for the Navy. As a central data aggregator, processing, and distribution node in this architecture, the F-35 can execute its air combat quarterback role. The global F-35 fleet today stands at more than 1,100 aircraft, with the total fleet expected to be greater than 3,500. Enabling the U.S. and its allies to maintain command of the skies far into the future. |
4,175 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | fleet expected to be greater than 3,500. Enabling the U.S. and its allies to maintain command of the skies far into the future. To further our strategic vision, my immediate focus is on operational execution. Driving cost competitiveness, quality, and schedule every day. With $173 billion of backlog, more than two years of sales, we're focused on delivering on time and on budget. We're continuing to execute our 1LMx end-to-end business process transformation which has been underway since 2022. Through this, we've driven increased production of high-demand systems like HIMARS, we accelerated software deployment through our software factory, and enabled model-based engineering with digital twins of many of our products. And going forward, we have a deep bench of talent needed to continue to succeed. An apparent example of that is our new CFO, Evan Scott, joining us today for his first quarterly earnings call and his new role. A 26-year veteran of Lockheed Martin Corporation, Evan knows this business inside and out, and he has a deep appreciation for our customers and their missions. I'm confident that he'll be a great asset to our executive leadership team. And now I'll turn it over to Evan to share more about his background and our financial results. |
4,176 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Evan Scott: Thanks, Jim. Good morning, everyone. It's a privilege to be speaking with you all this morning. As Jim mentioned, I've been at Lockheed Martin Corporation my entire career. The depth and breadth of the work we do to help American and allied service members complete their mission successfully and return home safely is truly unmatched. Over the course of my career here, I've had the opportunity to work across a range of functions. Including as treasurer, and the CFO of two business areas, Space and MFC. I've been fortunate to see firsthand how this company operates and evolves to deliver value across every part of the business for both our customers and our shareholders. Even before accepting this role, I worked hand in hand with leaders across the company on our business strategy and priorities, helping to ensure continued financial discipline and execution of our capital allocation strategy. While driving growth and advancing our mission solution focused Twenty-First Century Security Strategy. I have great respect for the path that's been charted and recognize the company's solid foundation for continued growth. My intention is to carry this momentum forward staying true to the strategic vision that has positioned us for long-term success and working closely with Jim, Frank, and the rest of the executive team to deliver on our operational and financial targets. As we continue this journey, you have my commitment to maintaining transparency, consistency, and open dialogue just as we always have. And on that note, let's turn to our performance for the quarter starting with key financial highlights, on Chart four. Our strong financial results in the first quarter positioned us well for the remainder of the year, highlighted by 4% sales growth, and 11.6% segment margins. With all four business areas generating double-digit returns. Boosted by better-than-expected performance on contract completions at Aeronautics, RMS, and Space. GAAP earnings per share of $7.28 increased 14% with benefits from higher |
4,177 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | contract completions at Aeronautics, RMS, and Space. GAAP earnings per share of $7.28 increased 14% with benefits from higher volume, higher profit adjustments, and lower share count more than offsetting higher interest expense and lower FASTCAS pension adjustment. Shifting to new business, while our book-to-bill was less than one in the quarter, backlog remains healthy at approximately $173 billion. Our largest awards in Q1 came from MFC and RMS. As Jim noted, within MFC, we recorded approximately $2 billion in orders for the JASM LRASM, large law procurement Yuca, and facilitation contracts, supporting the production ramp to 1,100 units in 2027. At RMS, we booked six years of future work, supporting the implementation phase, of the Canadian Surface Combatant River Class Destroyer program continuing our partnership with Irving Shipbuilding to upgrade the Canadian fleet. Moving to free cash flow, we generated $955 million in the quarter, after investing nearly $850 million into R&D and capital expenditures, in the maturation of innovative technologies, digital transformation, and operational efficiencies. We, with the overarching goal of improving performance and providing the most complete multi-domain solutions for our customers. In addition to investing in next-generation capabilities, we maintained our commitment to shareholders by returning over $1.5 billion through dividends and share repurchases. Now, I'll hand it to Maria to discuss the business area results in more detail. |
4,178 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Maria Ricciardone: Before I transition into the business area details, one reminder, there are no calendarization differences between 2024 and 2025. All four quarters have 13 weeks in both periods. Okay. Starting with Aeronautics on Chart five. First quarter sales at Aero increased 3% year over year, to $7.1 billion. The increase was primarily due to higher volumes on the F-35, mainly on production contracts. Segment operating profit increased 6% year over year, due to the higher volume, as well as higher profit booking rate adjustments, including the benefit from favorable performance at completion on a classified contract. In February, Singapore signed the Letter of Offer and Acceptance for eight F-35As. This milestone expands Singapore's program of record to 20 jets and demonstrates continued international interest in the F-35 and the advanced capabilities it provides. Turning to missiles and fire control on Chart six. Sales at MFC increased 13% from the prior year, driven by higher volume on multiple tactical and strike missile programs, including JASM LRASM, GMLRS, and HIMARS. Segment operating profit improved 50% year over year, driven by higher volume and higher profit rate adjustments. The higher profit rate adjustments were primarily due to the absence of the $100 million loss on a classified program we recognized in last year's first quarter. Normalizing for the loss, MFC's profit in Q1 2025 improved in line with sales at 13%, with margins up 10 basis points year over year. This quarter, we debuted the Common Multi-Mission Truck family of air vehicles that can be produced rapidly and affordably for domestic and international customers. Known as COMET, this affordable mass missile has an all-digital design and modularity that offers mission flexibility. COMET demonstrates 1LMX at work. It is the result of model-based engineering, which maximizes component reuse and commonality across programs to radically accelerate development. For example, for COMET, we reduced the time required to get to a |
4,179 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | across programs to radically accelerate development. For example, for COMET, we reduced the time required to get to a preliminary design review, a major milestone, by 50%. Shifting to rotary and mission systems on Chart seven. Sales at RMS increased 6% in the quarter, to $4.3 billion, driven by higher volume on the Canadian Surface Combatant and radar programs within the integrated warfare systems and sensors portfolio, and higher volume on Black Hawk at Sikorsky. Operating profit was up 21% year over year, due to the higher volume, as well as higher profit rate adjustments and a favorable contract mix, including a benefit related to an intellectual property licensing arrangement. The picture to the right shows drones used by the Lockheed Martin counter UAS team in the recent field event that Jim mentioned in his remarks. And on Chart eight, we'll wrap up the business area discussion with Space. Space sales decreased 2% year over year, due to lower volume at National Security Space, primarily related to the Overhead Persistent Infrared Radar program (OPIR), partially offset by higher volume at Commercial Civil Space, due to lunar program lifecycle. Despite the lower sales volume, space operating profit increased 17% compared to Q1 2024. This increase was driven by higher profit rate adjustments, primarily due to favorable performance at completion on certain commercial civil space programs. Lower equity earnings from United Launch Alliance partially offset this benefit, as ULA had fewer launches year over year, as well as higher initial costs associated with Vulcan profitability. The picture to the right is an LM-400 technology demonstration satellite that recently completed its prelaunch processing and is awaiting the next available launch window at Vandenberg Space Force Base. The technology demonstrator is the latest in a series of self-funded missions to demonstrate the maturity of new technology on orbit and reduce risk for our customers. The LM-400 is capable of serving military, commercial, or civil |
4,180 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | of new technology on orbit and reduce risk for our customers. The LM-400 is capable of serving military, commercial, or civil customers, can be customized to host a variety of missions, and can operate in any orbit. Now I'll turn it back over to Evan. |
4,181 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Evan Scott: Thanks, Maria. Shifting gears, I'll walk through guidance on Chart nine. Our expectations for Lockheed Martin's 2025 financial outlook remain unchanged from what we laid out in January, with the strong first quarter results positioning us well to achieve a consolidated full-year outlook of mid-single-digit sales growth, solid 11% margins, and high single-digit free cash flow growth of $6.7 billion at the midpoint. In addition, there is an opportunity to increase backlog in 2025, providing a solid foundation for sustained growth. As I mentioned earlier, the strong profit we realized in the first quarter provides increased confidence in our ability to absorb currently estimated 2025 profit impacts from tariffs and the ENGAT announcement. While it will take more time to complete a thorough business assessment of these dynamics, we're optimistic about achieving our profit targets for the year and look forward to partnering with Frank and the rest of the leadership team on operational excellence initiatives to unlock company-wide efficiencies. Now given the dynamic backdrop, I'd like to note several key assumptions within our guidance. First, on F-35, we continue to expect between 170 to 190 deliveries for the year from the world's premier fighter jet production operation, with a backlog of approximately 360 jets at the end of Q1. And we anticipate definitizing the Lot 18 contract in the second quarter, which we expect will unlock cash currently tied up in working capital on the balance sheet. At the same time, we're making good progress on TR-3 stability and incremental capability releases. Second, the outlook assumes a certain level of tariff impact as we expect to mitigate potential cost increases and offset cash timing pressures. We continue to work closely with our customers on this and will provide updates during the course of the year if we see further impacts on our business despite those efforts. Third, our guide accommodates the direct program impacts of the ENGAT announcement on 2025 quarter |
4,182 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | despite those efforts. Third, our guide accommodates the direct program impacts of the ENGAT announcement on 2025 quarter sales, profit, and cash flow. As you would expect, we are currently evaluating the broader business implications and will have more to share when we report on our second quarter results. Lastly, we assume our programs are funded in a timely manner to support operational needs and the outlook does not include a pension contribution for this year. Looking beyond our strong 2025 guide, the current backdrop supports sustained backlog strength with improved U.S. and international budget opportunities. This provides a line of sight to stronger sales growth rates through 2027 than previously expected. This steady top-line growth combined with operational improvements are expected to provide a solid foundation for consistent free cash flow generation. That enables our capital deployment priorities over the next three years. Namely to invest over $10 billion in R&D and capital expenditures, and return at least $18 billion to shareholders via dividends and repurchases, all while continuing to fund required pension contributions. In summary, on Chart ten, we're off to a solid start in 2025 and have a strong focus on operational excellence to ensure we deliver on our customer and programmatic requirements while also building momentum towards delivering our full-year guidance. In parallel, we remain committed to investing for the future and creating long-term value for our customers and shareholders. With that, Sarah, let's open up the call for Q and A. |
4,183 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: You may remove yourself from the queue at any time by pressing star then one again. If you are using a speakerphone, please pick up the handset before pressing the number. Once again, if you have a question, please press star then one at this time. Your first question comes from David Strauss with Barclays. Your line is open.
David Strauss: Good morning. Thanks. And, Evan, welcome to the call. Jim, wanted to ask you about the NGAD decision. At this point, have you received a debrief from the Air Force and gotten some feedback there? And how are you thinking about the way forward in terms of potentially protesting the award? Thanks.
James Taiclet: Yeah. Good morning, David. We did get a classified debrief from the U.S. Air Force on it, their NGAD, and we are taking that feedback internally and looking at all the aspects that we were briefed on, which we can't speak to because of the classification level. But we are addressing those. On a strategic basis, where we are going with this decision is not to protest it. We are not going to protest the NGAD decision of the U.S. government. We are moving forward and moving out on applying all the technologies that we develop for our NGAD bid onto our embedded base of F-35 and F-22. I feel that we can have again, 80% of the capability potentially but at 50% of the cost per unit aircraft by taking the F-35 chassis and applying numerous advanced technologies, some of which are already in process and Block Four and F-35, but others that we can apply and we are going to offer fairly rapidly to the Department of Defense. To really take that chassis and supercharge it for the future. And that's kind of a fifth generation plus concept for F-35 and that investment in NGAD technologies that we made over the last few years are gonna be applied directly to that chassis. And like I said, eventually, there'll be 3,500 of those chassis out there. At various stages of technology and capability. We think we can get most of the way to sixth gen at half the cost. |
4,184 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from Jason Gursky with Citi. Your line is open.
Jason Gursky: Hey. Good morning, everybody. Evan, welcome to the call, my sentiments as well to you. Jim, I was wondering if you could just comment a little and maybe reflect on some of the executive orders that have been coming out of the White House since the new administration came to office back in January. We've seen quite a bit come out, some of it related to FMS and speeding up the process there. But I think as recently as last week, we've got an executive order that points to the potential rewriting of federal acquisition regulation. I'm wondering if you guys have some perspective on what the administration is up to here, what they're trying to accomplish, whether this is just strictly reducing red tape and speeding the process up or if there are going to be some longer-term structural consequences for the industrial base and the way that you interact with the building. Thanks. |
4,185 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Yeah, Jason. Not only do we welcome these, we applaud these executive orders and have been advocating for them since I joined from the telecom industry, the management of this company about four or five years ago. So we are involved in advocating and making recommendations along all of these lines. One of the biggest piece issues where, you know, there's limitations on the speed at which digital technology and even the most advanced physical technologies can be introduced into the national defense enterprise is the red tape. And so the statutes, regulations, constraints, audits that have evolved through the DOD bureaucracy over decades have never reversed themselves. This is a chance for those to be really scrutinized and reduced. We will be speeding up not only our FMS opportunities around the world by what the administration is pressing for here, but we'll be able to get faster acquisition pass for both physical and digital technology. So I think reducing the bureaucratic red tape that's built up in this industry over the past few decades is going to be a boon to our industry. And when I say our industry, I mean broadly. Right? And that includes the, you know, the traditional, as we are sometimes called, aerospace and defense prime contractors. It includes major technology companies such as Verizon and NVIDIA and Microsoft that are our partners. It includes midsize and new entrants. We want the best of U.S. industry and technology development applied to the national security space. And we want to be part of that. And we applaud all these changes that are coming down through the executive orders. The one thing I want to make sure that we get a chance to do is a chance to compete on every dimension. I used to be captain of the Air Force rugby team, and all I want to do is get my team on the field and get in the game. I don't care if it's a small contract, a big one, if it sounds like a tech approach or a traditional approach, we can compete on every playing field, and we just want to have that |
4,186 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | it sounds like a tech approach or a traditional approach, we can compete on every playing field, and we just want to have that level playing field to compete on. So long way of saying, I'm really encouraged and energized by what the administration is doing here. |
4,187 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from Kristine Liwag with Morgan Stanley. Your line is open.
Kristine Liwag: Hey. Good morning, everyone. And Evan, welcome to the call. So maybe starting off, the tariff situation is fast-moving, but there's a general sense that defense companies like Lockheed Martin Corporation are more insulated than other industrial companies. And I guess to the extent that they do exist, what are the underappreciated risks of tariffs in your business? And Evan, as a new CFO, what are your priorities as you navigate this environment?
Evan Scott: Sure. Yeah. Good morning. Thanks, Kristine. So from a tariff perspective, I do agree that we have certain protections in our industry, and after reviewing with each of the four BAs, I feel comfortable we've got an approach to mitigate the impacts, and that's what gave us confidence to reaffirm guidance. I'd say in a lot of cases, we're going to have just direct protection in our supply chain, not in all cases, but in many cases, to avoid tariffs altogether. And then for the vast majority of our external contracts, we've got mechanisms to recover impacts. So I think for us, we see it less as a function of recovery, although we certainly have work to do there, but it's probably more about timing. And so specifically, is there going to be a lag between incurring a tariff cost and recovering those costs? So it's going to stay fluid, but we feel like we've got a good path now, and we'll just keep updated as that progresses throughout the year.
Maria Ricciardone: And just as a reminder, Kristine, you know, 40% of our contracts are cost type. And so, you know, what Evan's referring to mainly is the 60% that are fixed price where we have those contractual clauses both FAR-based and specially negotiated that enable that recovery through different equitable adjustments means. I just wanted to make sure I added that as well. |
4,188 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Evan Scott: Thanks. Yeah. And to the question of priorities, yes, thank you for that. So I plan to lean on prior experiences of this company of moving to high-impact roles. And so, number one goal for me typically is just to make sure momentum is maintained. We move too fast to allow for any gaps in priorities. And so always make sure there's no slowdown in any initiatives my predecessor was driving. And so you really shouldn't expect to see any near-term changes particularly with our consistent focus on delivering shareholder value. Right? That's just so baked into our culture and is not in question. So I as Jim said, fortunately, I'm very familiar with our programs and strategies. I've got well-established relationships with the ELC from my career here. So specifically, I look forward to meeting with stakeholders and spending significant time listening to the priorities of the investment community. And in those meetings, I'll certainly be prepared to answer questions, but I'm also going to have several of my own to ask. And so definitely look forward to quickly partnering with ELT and my team, move with urgency, and we'll focus on performance, speed, and value-enhancing growth.
Operator: The next question comes from Gautam Khanna with TD Cowen. Your line is open.
Gautam Khanna: Yeah. Thanks, and welcome, Evan. Was wondering if you could comment on F-35 Lot 19 timing and also if given there's a lot of international demand for the aircraft, how ready are some foreign customers to take delivery earlier if the U.S. cuts back the buy? I'm just wondering, like, how much of a U.S. cutback could you absorb and still keep the production rate at around 156? Thank you.
Evan Scott: Okay. Right. So thank you. So starting with Lot 19, we are looking at the second half of the year for this. And that's baked into our guidance. |
4,189 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: And then on the international demand, Gautam, it's really strong. There's been a number of announcements over the past few months on plus ups to program orders from the international customers. You know, and I was over at the Munich Security Conference, the main topic in the private meetings with each of the defense ministers and prime ministers was how fast can I get my aircraft. So I feel that in our aeronautics team feels that if there's some moderation, which we do not expect, by the way, in U.S. F-35 production, that we can make up for that in the international opportunities we have and maintain our 150 plus per year production rate. So we're comfortable that that can be maintained.
Operator: The next question comes from Richard Safran with Seaport. Your line is open.
Richard Safran: Jim, Maria, good morning. Evan, welcome. Jim, could you talk a bit more about your opening remarks on the Golden Dome? I thought maybe you could discuss funding opportunities, timing, and specifically, maybe address how you think that might affect production ramp at MFC, you know, just generally how that might be impacted. Thanks. |
4,190 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Yep. So it's forming up into sort of three segments, if you will. The government's going to make these policies and define these clearly and specifically, but the way we're viewing it is there's a ground segment which will be radar sensors, command and control systems for existing defensive systems. Right? Ground-based defensive systems. And some of the programs that I already spoke to earlier today and you're kind of alluding to them as well, you know, we have the NGI contract. All of these are PAC-3, are going to be in higher demand. And so we will be in an excellent position to address those right out of the gate. Alright? So even on that ground segment, there are ways to network these systems and redeploy them from existing generally army bases or naval bases in the CONUS already. These systems are out there. They're operational. They're ready to be deployed to foreign operations, but we could actually — it's up to the government. Again, this is policy and not our purview, but we can be supportive in actually fielding those systems, you know, from existing bases to population centers or other high-value areas where we want to really defend the homeland, so to speak. And then we can network, and we've shown this, for example, PAC-3 and THAAD systems and radars. And that's just one example of this interconnectivity that we can create with existing platforms using new digital technology. And that's why 5G and AI distributed cloud are so important because we will have to create a web of defenses — a web of layered defenses even in this ground segment to start really being effective in Golden Dome. And we can literally do that, you know, once the starting gun goes off. The second phase of it will be space-based. And that's another place where, by the way, Lockheed Martin Corporation has a lot of existing assets. We're going to want to help do is network those existing space-based assets down to those more tactical systems on the ground. So that we have early warning, we've got target tracking on |
4,191 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | assets down to those more tactical systems on the ground. So that we have early warning, we've got target tracking on launch in mid-course from space so that we can have more accurate fire control over those missile systems in the United States. So that the space layer will be complex. Eventually, there may be kinetic or non-kinetic action from space. That's going to take a little more time to scale. But that's the second arena. And then thirdly, another place where this sort of Twenty-First Century Security Strategy will really intersect the third dimension here is an overarching command and control system, an open architecture standards-based where we can have, whether it's, you know, Northrop Grumman, Raytheon, Lockheed Martin Corporation, other systems, new entrants, will be tied into this fabric and really complete the Golden Dome, so to speak, by doing that. That's that may be a little bit further out. But we can do these tactical ground-based system deployments very quickly, and we can seal production. We've already got investments to do that. So I think we're in excellent shape for Golden Dome. As I suggested in the prepared remarks, our strategy was built for something like Golden Dome, and we're out in front of it with our customers. Budgeting, timing, congressional, you know, funding, all those kinds of things are government policies that will be implemented on their side. But we are literally ready to go when the starting gun goes off. |
4,192 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Evan Scott: And if I could just add a lot given I've got a lot of passion on Golden Dome. I haven't worked at MFC, and as Jim said, we just really felt prepared for this. And it was an early sign our customer tends to move rapidly and with purpose. So just a little bit of stage where it is kind of from the proposal side. The customer issued a RFI, request for information, seeking ideas from industry that would inform possible RFPs. And so what was remarkable about this one from my perspective? The RFI had a 30-day turn, which is super fast for something this significant and complicated. And Lockheed provided, as Jim said, just a series of capabilities, really over 100 different capabilities through pricing that cross all four BAs with a focus on cross-domain architecture. So clearly not all those RFI responses will turn to requirements. We've given our customers a significant amount of go-fast ready capability to consider, and we look forward to partnering with customers and suppliers on next steps, as Jim said, thanks.
Operator: The next question comes from Pete Skibitski with Alembic. Your line is open.
Pete Skibitski: Hey, good morning, guys.
Evan Scott: Good morning.
Pete Skibitski: Jim, one aspect of the new tariff regime, if we go back to that, is not necessarily the cost aspect, but understand China is putting new export controls on rare earth metals. And I don't know necessarily the inventory levels that the U.S. or Lockheed Martin Corporation typically has of these commodities, but I know it's been a topic in DC in terms of the reliance there for a number of years. So I was just wondering if you could give us your thoughts on just the availability impact that the new tariff regime could have? Because I do understand the rare earth are used across a wide variety of defense products. So I was interested in your thoughts. Thanks. |
4,193 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Yeah. First of all, by law, we're constrained from using Chinese inputs of any kind from any source into our products and services. And so is our supply chain. So there are alternate sources for our segment of the aerospace industry, I'll call it, which is the defense U.S. defense segment. And secondly, there are stockpiles that are available and will be utilized. This is, I think, a larger issue for nondefense industries that require these kinds of materials. Because, you know, our supply chain contracts again, have specified non-Chinese sources for the materials over the decades. So I think we're in pretty good shape on that. And I would, you know, again, applaud the U.S. government in seeking to continue to develop U.S. sources for these raw materials all the way through semiconductors, etc., that we've been, you know, again, advocating for about four or five years, which is our anti-fragility aspect of our strategy, which is we need U.S. sources for even basic materials like titanium, for example, certainly non-adversary sources. And we've been pushing for that with the U.S. government and doing it internally for four or five years based on that sort of anti-fragility concept that seemed to let. So we're I think we're well positioned here. To work through these rare earth and other material issues.
Maria Ricciardone: And Pete, I would just add to that in terms of our guidance for the year. We're pretty confident that a disruption in the material supply for rare earth would not impact our ability to meet our current delivery commitments for the remainder of this calendar year. We have sufficient quantity that's already integrated into our value chain, so it provides a bit of a buffer from potential supply chain disruptions in the near term, and we'll obviously continue to assess as we go on.
Operator: The next question comes from Douglas Harned with Bernstein. Your line is open. |
4,194 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from Douglas Harned with Bernstein. Your line is open.
Douglas Harned: Good morning. Thank you. On missiles and fire control, you've had some big increases in backlog. You've got nearly a $2 billion increase this quarter. And so can you talk about some of the production increase plans you have in your major programs? And then is this a business that we could foresee having an extended high single-digit growth rate over the next few years, given that backlog?
Evan Scott: Sure thing. Thanks, Doug. Yeah. So you're right. We've definitely seen strong budget demands here of both domestic and international for the MFC products. And so several of the products are ramping currently. And we talked about earlier the JASM, LRASM ORD, that gives us a path to ramp to 1,100 by 2027. PAC-3 continues to ramp. GMLRS, so we're seeing good demand and very strong backlog. And so some of these products will continue to ramp, and to Jim's point about Golden Dome, I mean, these are always also areas for opportunity on the INF side to be a major part of the Golden Dome architecture. So that could very likely be a source of demand as well. But the reality is with these products, we have a lot of confidence they'll just continue to be in demand all the way across. So can certainly talk more specifics on individual product lines, but I think across those are where we're going to see the real growth with JASM, LRASM, PAC-3, and GMLRS ramping. |
4,195 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Yeah. And Doug, it's Jim. So just to complement what Evan's saying here. So we map out until the end of the decade our high growth product lines, and you heard us talk about some of them. But adding in there, you know, in addition to GMLRS, PRISM, which is again, got the $5 billion IDIQ order just awarded. Is in that category. Fleet ballistic missile, actually. So, you know, it's sort of a quiet program, but we think it could be double-digit growth CAGR over the course of the rest of this decade, etc. And as he said, JASM, LRASM is in that category of high single-digit growth over a fairly long period of time to get your specific question. So there's a number of others, NGI is in there too. So you know, the missile systems that the company has developed over again, you know, 70 years when it comes to FBM, that is hard to duplicate. These are the best systems in the world. Again, when you go to Munich or Singapore or someplace like that, our customers just readily admit that around the world is it this company has some of the best systems in the world. It's got the best and most sophisticated fighter aircraft in production in the world and will for at least the next five years or so. And does it at scale? And it's the only way we can kind of compete. We, meaning the royal we of our allies and us, with China who's building, you know, 100 plus J-20s a year and now J-30s on top of that. So, you know, our international customers recognize the capabilities of the company, as do our U.S. customers. And again, we're very well positioned for the future here, especially in that missile segment where this stuff is really hard to do, takes decades of experience, is on the edge of known science, and it's not easy to duplicate and just kind of show up at the party and try to compete here. So we're in really good shape in those missile programs.
Operator: The next question comes from Scott Deuschle with Deutsche Bank. Your line is open. |
4,196 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from Scott Deuschle with Deutsche Bank. Your line is open.
Scott Deuschle: Hey. Good morning. Jim, you spoke earlier about enhancing the F-35 with technologies you developed for NGAD. Can you clarify, number one, if that effort would be self-funded or customer-funded? And then number two, can you walk through what's driving your confidence in integrating those technologies into F-35? Particularly given some of the recent challenges with technology insertion. Thank you. |
4,197 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | James Taiclet: Sure, Scott. So, look, this is a baseline. We have 70,000 engineers and scientists in the company working on really interesting stuff all the time. And some of the sixth-gen plus solution set is already being funded by the U.S. government and the F-35 program itself. There are components, some of which are classified, so I can't really specify them. But, you know, key techniques, I'll say, and approaches that fighter pilots need to have to be competitive and win. I'll just kind of talk to those in general, and you can be assured that we are investing and the government is investing together in these things. Some of these elements are again through the F-35 program as it stands today. Some of it was our government-funded investment in R&D for NGAD. Right? Just a competitive process. Was funded for both Lockheed Martin Corporation and Boeing over a period of years by the government. And we made independent investments along the way too in both of those programs. So there's not a clean percentage, but there's co-investment between the U.S. government, our allies, and Lockheed Martin Corporation in the technologies I'm speaking to. And having had done this myself when I was younger, these things are really important. So one is sensing the enemy at a distance greater than they can sense you. And so those kinds of categories are radar, passive infrared, and passive infrared is really important. Because if I'm transmitting radar, that means somebody else's electronic warfare receiver can see me. And then they can maybe shoot me. So the better I have infrared, which passive we can sense that, and the best radar on top of that. Those kinds of sensors are really, really critical because I explained this to me at the White House. The president's like, dogfights are not what we want anymore in air-to-air combat. We want to shoot the other guys, as I said, before he even knows we're there. So you do that, first of all, with the critical sensors to find them. Then you make sure they can't find you. And that's |
4,198 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | there. So you do that, first of all, with the critical sensors to find them. Then you make sure they can't find you. And that's the stealth technology, and there's some techniques that you know, we've used for our NGAD offering. That can be applied, whether they're materials, geometries, countermeasures for stealth, so no, I can't be seen. That's the first part of the equation. The second part of the equation is you want to have a tracking system and a weapon that can go farther and hit the enemy's plane before they can ever even reach you with their weapon. Right? And so there are techniques and capabilities we delivered with our NGAD bid that were developed for that, and that we can now apply here to the F-35. So we're basically gonna take the chassis and turn it into a Ferrari. Right? It's like a NASCAR upgrade, so to speak. Where we can take the F-35, apply some of those co-funded technologies both from NGAD and the F-35 program, and you're gonna have my challenge to my aeronautics team is let's get 80% of sixth-gen capability at half the price. And that's something that these are engineers, you know, they wouldn't have agreed to this if they didn't think there was a path to get there. That's something we're gonna go out and do. And this is this best-value approach that we've been working our way towards that at Lockheed Martin Corporation over the last four or five years. How do we get the best value to the customer who has a limited budget and an increasing threat? We use these digital technologies. We apply something from one system or one BA to another. And we actually try to create that best value equation. It's a little kind of not uncomfortable, but new novel for our industry to think that way. But we are thinking that way. And value is important And maybe as or more important than the highest technology available. It's gotta be scalable. It's gotta be affordable. It's gotta work every time, and so that's what we're after. |
4,199 | LMT | 1 | 2,025 | 2025-04-22 11:00:00 | Lockheed Martin Corporation | 285,827 | Operator: The next question comes from Michael Ciarmoli with Truist. Your line is open.
Michael Ciarmoli: Hey, morning, guys. Thanks for taking the question. Jim, maybe just one point of clarification. It sounds like with the NGAD loss you reassured your multi-year growth, and it seemingly got stronger from a lot of the missile commentary. I just didn't know if that also, you know, took into account maybe weaker domestic F-35 volumes going forward. And then just on your prior comments, I mean, it sounds like you're gonna compete for NGAD dollars directly. You know, converting this chassis to a Ferrari. And any additional color on potential exportability of this technology? I mean, could it be sold to international customers, and has there been any direct discussions about funding or timing from the Air Force?
James Taiclet: That'll be an element-by-element exportability decision by the U.S. government. But what we try to do is build exportability into each of these components. And so we will offer, you know, of course, the U.S. government gets first view of these things. They'll get to adjudicate whether it's exportable and to whom. But our goal is to make as much of this capability, this value capability that we can for fifth gen to have our allies get access to it too. But that's the U.S. government decision, but we try to design in a way that it's a relatively hopefully, an easier decision for exportability rather than a harder one. |
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