LMT - Earnings call transcript Q4 2021 | Lockheed Martin Corporation

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Operator

Good morning, everyone, and welcome to the Lockheed Martin Fourth Quarter and Full Year 2021 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 Mr. Greg Gardner, Vice President, Investor Relations. Please go ahead, sir.

Greg Gardner

good and John, you, morning. Thank welcome I’d and our quarter to year like XXXX to full earnings fourth everyone conference call.

Joining the Jim are to forward-looking federal provisions Taiclet, historical fact Executive the made in for today’s from call pursuant forward-looking in differ of the of statements. President in law. Statements considered those release may are Financial press on to may Actual Mollard, Chief a that not from actual cause that Chief some filings Please John Officer; materially me and differ statements. and securities harbor results and of forward-looking the made SEC today’s the acting Officer. factors are safe call those materially results our today see Chairman, projected our are our statements and description

today’s charts. access website We used These link follow over our the Jim. that and on to today we like view www.lockheedmartin.com have plan also supplement measures charts Investor the at may call. on to include and our non-GAAP that, charts address to turn the Relations I’d comments. the regarding that posted to call call our Please during to With click in information website be

Jim Taiclet

key acquisition quarter XXXX. And earnings regarding our good hope Year. fourth review a us Rocketdyne an I’ll update of call Thanks, New Greg. Good as morning, Aerojet Holdings. begin everyone. area to XXXX results, start our joining our our I business and on the you’ve proposed outlook had with Thank for we accomplishments you for

block transaction. have FTC it earnings we Since would that our lawsuit. from morning, a fact, sue FTC received filing in they the notification thought disclosed we that highly have, authorized likely As this time, that the the in to release

evaluate the review of and will lawsuit our options. all We

filing the or the the we defend may to lawsuit the elect merger of suit, With terminate agreement.

October, detail and will minutes, from few In XXXX. for highlights provide like financial But in the our In our billion operating would a after forecast we $XX a I and year. discuss our and both financials to we we on for with We sales our few our first concluded our planning an outlook and quarter achieved established exceeded forecast, results. John Moving updated or earnings begin to met per segment XXXX, process, projections. the profit exceeded. our share which financial

from process. cash exceptionally allocation was over supporting disciplined operations billion, our Our strong, and dynamic $X.X capital

solutions challenges, our and the the as During meet year, in now, made see are customers all every the for going benefit day the affordable well of in we facing our support costs shareholders. to can investments reshaping rapidly significant the as evolving and deliver systems signature Moreover, platforms that modernizing emerging we our forward technologies, we as and we operations future to growth as well. continue our so challenges to news our reduce increase efficiencies customers and for

areas included spent billion new efforts energy we a watermark independent development, and our for research XXXX, During IR&D artificial and directed the Notable Company. hypersonics, on $X.X of high intelligence.

mission-based operations well technology to Company position our to our joint XG.MIL platforms, enable truly of most across meet roadmaps development the and customers’ investments the all-domain the services initiated military also We critical These allies. U.S. needs future. advanced and multiple architecture into

throughout to establishment production the state-of-the-art software and future, facilities the model-based hypersonics Significant introduction program. support the and hardware expenditures, year, billion of outlook. the customers’ focused capital we included projects of factories on Company, and engineering cutting-edge capital on to requirements spent growth supporting our $X.X new three organic the enable of of our adoption additional During addressing also solutions program key

investment Control supporting This margin elements accelerated add as many an speed production intelligent sites and linking framework, the share production, to quarter, to and Together, provide digitally in X of the million advanced retired in programs. drive hypersonic these thereby over Courtland, Space thermal to the facilities brought during our when resulted Resource cost strong From agreement. payments technology. manufacturing which we a total together Alabama, recently our cash Fire dividend enterprise XXX,XXX hypersonic quarter, perspective, our billion, and during facility total Florida represents operations program such a in fourth Company. facility advancements in repurchase we this XXXX facility and and assets California. a Test capital billion $X integrates Skunk for critical critical our Assembly organization future transformation and across Center $X manufacturing strike shares that advanced billion our The digital our our to coupled factory opened improvements into our returned shareholders under nearly and Titusville, throughout in opening the efficiencies brought of of robotic of return and square-foot year. Courtland intelligent the capabilities our $X Works repurchase During in amount with protection these the long-term This our Missiles both new facility spacecraft Palmdale, joins executed

We remaining $X expect will authorization utilize budgets. briefly continue XXXX. to to be billion Defense the our in of opportunistic touch with share repurchases Department on I’ll and now

continuing strong signed for approximately raised billion above February billion X% year defense was the This the Department both through a requested legislation accounts Biden. investment $XXX law fiscal XXXX. XXth NDAA for The programs subsequently resolution a total amounts. approximately Defense Currently, is for DoD Congress FY in a the President’s of House for originally under National into XXXX and the quarter, increase Senate. of Defense operating support President by Authorization the with This bipartisan passed and authorizes bill policy the Act $XX

the supported, security affordably we believe reflecting our are capabilities. the portfolio that national is continues well process, fact our appropriations delivering Congress programs As customers’ with our aligned

sales with Now through -- Last long-term that in discussed growth increasing increase to now X% strategy. which growth steadily anticipate will turning our we approximately our expectations, quarter, our XXXX. sales by XXXX

F-XXs. of forecast record, classified primary key we underpin longer-term in our the activities, is As growth pillar programs new records of and for their deliver HX to suited hypersonics well long-term program in This our contract potential to in Canada value four awards. October, reconnaissance of over Expansion conventional discussed aircraft’s a this with combat, a the international business XX we purchase HX capabilities are are areas that strategy. is the citing pleased clear requirements. of month, on customers Fighter and signature Joint These their In Fighter Last highlight the programs momentum competition, in entry opportunities government in the objectives. as this Program our to elsewhere program growth Strike see its two $X best fighters of in follows support landing front Switzerland’s affordability future is F-XX of decision building as and select stealth go announcement new and announcements as the takeoff Finland and this national billion to to security survival winning quarter, that XX us. selected has the

an to Sikorsky enables Force Our King Rotary and past CH-XXK of procure Israeli Systems the a team opportunity pursue as This important the secured Stallion United letter signed Air international Mission the acceptance XX to Israeli to agreement $X also Force in helicopter. quarter of XX have another Air States buy exceed our government Sikorsky CH-XXK heavy-lift half the CH-XX their this with the option international legacy then helicopters, be over could been Israel with they replace value. those to dozen. current customer first flying fully billion years. fleet XXKs which look options exercised, If as

strategy, Another of our saw pillar also long-term growth fourth quarter. build activities, momentum our classified in the

to Air a area was by awarded Space RF Force prototype a fly U.S. space. contract Our develop in the classify -- business and payloads

program our industries, investments to with and initial road. final the operational satellite providing grow for franchise on to note, potential internal challenging longer-duration life. ongoing effects commercial mission XXXX greater Our deliver solution in engineering and bus, LM especially chain continuing for This and of this COVID-XX And for system leverages down on options a into XXX terms a a includes supply orbit defense new impacts. award an environment both contract presented the flexibility

tremendous functions as dedication future our operations extremely into growth our maintaining our teams and and and advancing and we’re the enterprise. defense national that with Martin, entire join our turn Lockheed XXst behalf across call areas John job drive Our One and advance your accelerate to all going perseverance organization, Century and production corporate our And of Lockheed business Technologies X engineering to our I you I’ll together answer into I’m and vision questions. customers. our that, in did the to business know World Martin to later over banded of of a proud and on science Digital

John Mollard

good Thanks, All everyone. right. Jim, and morning,

our the we’ve today. I follow release included As our earnings with results, charts highlight with along web please

billion, with strong provided quarter delivering This consistent which of made solutions our overview an guidance of Let’s customers. sales recorded with begin the X by revenue level fourth $XX XXXX sales, relevant in Starting we chart exceptionally an to affordable, of with possible we results. record October. was of and was

Additionally, of $X.X share we operational cash billion last a by $X.X discussed across dynamic performance the as earnings of generated October operating exceeded more our per strategy portfolio. profit capital in committed are billion entire strong allocation. $XX.XX of flow than we to quarter, and segment projections, And driven and our operating this disciplined We year.

We efficiencies ways can continue reshaping increase and costs. identifying reduce and our operations we

customers missions expenditures to we drive and research their and billion growth. $X capital Jim to mentioned, in As organic invested development our and help achieve

to internal this XXXX, repurchased of we fourth just billion annual reinvestment, with in payments billion, we including dividend over to $X $X returned billion increased quarter. shares billion In $X.X $X Combined addition the in of over shareholders. approximately

our Looking growth foundation forward, with and as October we in XXXX XXXX remains information our beyond. our consistent trending outlook for build for

operating both the with compared share shows our X, represent segment X% our Turning sales earnings results Sales the compare year to Chart we X last and per operating XXXX high for profit Company. this watermarks year’s and for profit results. segment to and increased year. chart

$X.X and cash that year pre-transaction and improved was charge income, than basis, gains cash XXXX with Ventures a through and year shareholders cash $XX.XX incorporates quarter. $X.X the full XX% share pension liability and On generation increased was our flow due adjusted dividends. higher EPS segment On repurchases earnings $XX.XX as XX% increased over $X.X pension volume flow of in FAS/CAS our our count. share increased Our generated returned of we operating Lockheed look in in associated operating transfer billion full margin, of during our share cash deployment. portfolio, at flow. an to chart noncash we free completed cash to Martin third and X, this the results free performance the $X.XX XXXX billion We reduction outstanding billion our in we per

billion, authority XXXX. share in is remaining amount entire that expect and repurchase deploy approximately $X opportunistically we Our to

billion $XX and $XX chart information, to operating in approximately million we guidance. on resulting and XXXX XXXX income which operating profit $X.X at than XX.X%. billion X of Moving segment trading billion, segment $X.XX our billion, pension projected October higher a our the margin estimate is approximately is provided $X.X in we of estimate October. with FAS/CAS sales at Consistent

is payments updated defers payment perspective, cash earnings chart be the we million. I unless our that or than projecting including the greater at required tax mention, in three-year these should estimate per from there tax now is will our equal are by capitalization impacts our R&D law that cash show tax are still to capitalize excluding make of to We of impact or for to which from possibility a for estimate R&D enacted we the be at as operations we refuels higher of remains $XX.XX, X, existing we law will the billion, generation. share $XXX and legislation. outlook change, a On legislation payments forecast current requirement amended XXXX expenditures $X.X approximately but

a international all and Our both collections upside was organizations, we driven quarter. from customers. increase offsetting outstanding across business collection fourth made fourth areas cash quarter flow million during accelerated to process this functional Partially the in and supply leading chain by was exceptional an support our tightly results payments coordinated $XXX of domestic to

continuing risk. billion at the we chain total variant payments of and to in surges to our over Omicron emergence supply mitigate effort year-end the $X.X accelerated cases, COVID and With increased

and and collection payments in accelerated operations performance from increase the billion outstanding $X.X flow. partners $X.X in resulted in Our our cash to our supply in free generating chain billion cash

higher capital flow the was capitalization, now operations increase is three-year after our Generating X, operating chart capitalization of greater the of dynamic before we prior areas. period. impacts total XXXX business million disciplined estimate. for high driven our billion $XX.X and from in operating strategy. than maintain segment project considering impact Over equal to billion, and forecast the On or break that potential by through the level from R&D than R&D period significant expectation fourth we we cash our performance which $XXX million will by incorporating results profit quarter and XXXX throughout this of over our extremely of cash our sales potential and allocation $XX support outlook provides $XXX out This

capital excited execute well-positioned our strategy to and dynamic Our our demonstrated on to trending balance in of fourth generate And years the quarter. out customers we generation. summarize, by John, guidance long-term and equal value in estimates shareholders. for And the XXXX cash highlighted all to ability come. mission XXXX the our remain information to for opportunities results in as to strong chart our building With on the the we for better with long-term ready delivered we October, Q&A. year focus we than October to are and consistent I’m as cash successfully and our that, high growth allocation with metrics exceptional we deliver disciplined XX levels we about or with operating operational we closed for our provided opportunities begin on in strong flow, on provided capabilities sheet the we’re

Operator

of we’ll Instructions] [Operator Peter with And the ahead. go go line Please Baird. to Arment

Peter Arment

Jim, the about day Aerojet the ask so the of to try I news deal. on figured I’d

evaluate the You would to you preferring plan towards lawsuit? you redeploy of line capital pending of mentioned on give do expect deployment, the you you proceeds color that really if choose us M&A any And defend on terminate transaction. of to you or pursuing Can are your kind or terminate, at to time least kind those the the strategy? kind

Jim Taiclet

for Rocketdyne of period post So, XX-day decision lawsuit defend terminate or either Peter, make to our allows filing agreement. with Aerojet the merger of agreement a that a

make determination. working be next that over days with and So, few to we’ll Board the our weeks

John Mollard

cash deployment? And

Jim Taiclet

I it’s course, about dynamic speak to of what Well, here, process. talking mean, and I Peter, opportunity to and actually with disciplined John allocation great a your question, been have capital

of call R&D we a long-term organic they’re made and of we they’re most that unlimited cash look capital those in to about. uses and dollar Last lens array because have basically, investments the So think get assess the in or year, it growth, what’s first great flow. we for new don’t shareholder, an CapEx. alternative to opportunities, array just to on beneficial billion CapEx at best IR&D $X the But business We talked ROI we And of and for going the all of our for about that total. either what’s going I through so was have or investment. ROIs the set of speak, the

bounded. it’s So,

M&A, look be we then are right expansive Those growth which inorganic joint available at et necessarily say. ventures, could now, not So opportunities, that let’s are cetera.

the as from to John. is And these dividend heard funds where share so, which of leads then that days, then our going are you repurchase you’ve growth, bulk and

we look shareholder and what And That’s ROI by best look going we disciplined. allocate to opportunity need those cash and for to to mean the we’re for the going our road, across all sets, capital down grow we’re dynamic that there. balance. the it’s don’t So, it then is

have on road. leverage, we We to down say, upside, choose take I’d should the it

to So, you’re us way. continue allocate going to that capital see in

just going and AJRD cash sit in back to we’re through not, sit our or back we’re going let to of count. not and whether grow say, capital goes So, on well, just the sort it

We’re dynamically keep it’s the used. most how going and it best to to allocating

Operator

Please go with Strauss from next Our question Barclays ahead. David is Capital.

David Strauss

then, side. million? comment to that X% on assuming we the If prior CR. wanted on might $XXX of to last taking just, Thanks. you’re And guidance come regard ultimately can John, to appropriations, that And on what side, plus if for do terms your guidance what this $X with down mentioned one, growth? guess, in through the changed authorization up R&D year capitalization the XXXX you Jim, I from the impact I it the billion you see the within for ask to what

Jim Taiclet

Sure.

and So, I’ll over then John. Jim start it’s off, here, to it turn

program the out additional From that, X And in increased it tactical funding for as additional C-XXXJs X there our came in encouraging and was NDAA, of Company, programs missile interceptors. So X Black a CH-XXK NDAA. was Congress for additional excellent Hawks, the and XX more beyond it really with some what that perspective, was the strike well.

really So literally the of across Company solid NDAA. the impact

does of XXXX. and that the XX, assuming We’re impact -- of X the place, of to left it, the of that process the given in us. only X we deliveries. NDAA, along resolution fiscal of there’s resolved in the It’s be first build already September point some by future or our year at most sort hopefully the visibility in revenue budget defense with will have appropriation really production coming pipeline continuing and get for And months orders revenue

back So it six going ups meaningfully and value say, shareholder, hit longer-term it’s you. in creators necessarily give us to are plus the to the to those not But John, I’ll for months. basically, -- seven next,

John Mollard

to with to program requirements. prosecute Yes. program pretty that impact especially the our to on it you’re impact, would have CR a would be areas impact And have our missions, able requirements on see. put CR, much where take customers’ would point us sort you full will not The year any grow. their a biggest a to in CR revenue of the on to just trajectory And to ability obviously, grow

would anticipate your -- R&D And the was de question payment the in So relatively change impact minimis think on absent next around tax the a CR, given. full I year I we’ve assumption. forecast

of $X number we’ve billion. last I think historically, a about -- talked

policy could billion." by was to you in to the But build have legislation now. that critical there’s see little is, we the I to that given vehicle is $X get in of not legislation back is the up of with that path will believe would our legislation address the subtle enactment that I’ll where start say, script. done definition President We’ve getting saying we consistent or repealed, thought. that by that deferred going aspect It’s kind have think changed than last Congress recognition however, and really remains up still number a possibility better the this and a quarter, nation’s there’s given needed do, more But "Hey, public this all activities. said to right R&D to objectives. enacted is end to probably one it I at unclear

to change $X specific the approximately $XXX to million Now, our in amount in billion up to the from guidance. we’ve the got

external legislative the calculating that first reviews taking did that impact. had without is advisors. on after that discussion assumptions, the framework scope what in shared capitalization activity these have capitalization. in of we that XXXX credit originally after of I certain we that questions establishing with we bunch had tax credit is what on about team were narrow the I form refined And will And role assumed. with concluded require a claimed of current the than provision used to R&D We’ve then activities. determined that we tax scope analysis tax of R&D and my with the the and -- action, historically grew was we R&D our advisors, understand relevant our One our assumptions any closer as projected

provisions tax code. to result, impact a of estimated consistent with the updated So, we’ve as is value the the reflect our that

Operator

next question Seifman Seth from is with JP Our Morgan.

Seth Seifman

outlook XXXX, back this the just John, which Aeronautics if each and was looking we I the above in was rate, the margin well quarter and XX.X% of kind that quarters. to second charge margin of add that for at above year the

down then trending in the So, can ‘XX? driving going what’s of and that year see talk profitability about how Aeronautics you forward beyond you this mechanics

John Mollard

dilutive. them, Yes, good on Works. margins lower activity their to absolutely. call our programs the very with Good programs, in that two Probably the financial Skunk predominantly These that ROI the these in dilutive growth in associated question. be ‘XX risk but are going margins given I’ll biggest, attract they impacts are is classified

expecting. on program that’s out growth So, Skunk coming we’ve be where the we’re our we’re That’s given got $XXX operation of with projecting a roughly And I of dilutive. in a the and Works ramp million first growth mean from year that in. to the F-XX going in deliveries line is, that lot roughly F-XX then, program, we’re

We’re roughly increase on revenue to F-XX million. $XXX projecting

in program two in you’re typically reduction we cycle, dilutive reflect where within its prudent to on in probably margin think is Given life a result, conservative program. biggest areas XXXX see prudent are Those margins it’s And F-XX growth. Aeronautics. growth the to but on that a margins that relatively the as going

to will be customers example, track, I to about our capabilities on I’m key in going lot think there achieve F-XX on be talked performing is perform a longer for that the if in track. Aeronautics term, do, to be keeping going will mission program. the delivering capability of the delivery And TRX able on to our the infrastructure internal we’ve keeping, that fully margins require the operating upgrade we to And need growing we production upside. the that’s enhanced confident metrics. program expansions on us

Operator

next is Kristine Morgan Liwag with from Our question Stanley.

Kristine Liwag

from from we you your see are $X your like progressing? where should programs And the by an urgency seems there’s XXXX? It update Pentagon acceleration various billion provide an in hypersonic hypersonics. more Can outlook on

Jim Taiclet

Army hypersonic of ago Kristine. I’ll to briefly. the has our, missile up good very furthest there. morning, size systems. of two And complicated just but is and for in call those they and with It’s product, that and In Hypersonics keep Navy, novel destroyer-type along, among programs from that them, the has Courtland be Alabama. That’s Long-Range the for Navy from are first that for so The teamed will missile up Strike concert really delivered from TEL some or intends what submarines shifts. Erector I’ve a the launched with somewhat Transporter the Prompt range what which already fact, strike the to are couple Army. mind training Army CPS. launch calls development produced a from TEL. be to weeks innovative just Conventional a TEL ultimately and them of guess, that going of But returned what’s a couple through set of mention are similar I perhaps called of Good program, to very the the unit opening stands facility units Weapon ground in And a use We’ve three that LRHW. Yes. in Launcher. a programs marquee

So, today. and from the with will they’re that next factory Courtland we’ll missiles in Army working The the years. produced And few over be Navy be serving the the there.

we speeds, B-XX The or to on an the that third ARRW produce carriers product Courtland Force, Air Advanced and with Air at we’re that called Weapon. Rapid bombers the now air-launched so as is the travels those Force Edwards in facility intend hypersonic there. that’s testing for missile and base Response A-R-R-W, That’s

on through going those Force. well. events production next to the as runs making that be we’re the years, couple program test in hope we So Air with And the of over

Again, the the story, CPS, to the there’s advanced hypersonics the think long-range the and air-launched So, are then summary. Army. the I that’s highlights, those more but for weapon

John Mollard

I question opportunities in to John. And There with sort it. the XXXX. of long-range To this is guide, Kristine, $X the revenue forecast grow I’ll stick on billion are your think

provide counter modeling driving to upside note But emerging to I’m customers faster. with to and comfortable we’ll think there’s that that Jim go could for -- billion. push some in purposes, maybe activity As that of mentioned, keep operational $X I that an eye forecast. our There’s urgencies faster on hypersonics us

Operator

to we’ll Safran with Global Rich go Seaport Securities. Next,

Rich Safran

two. have it’s If okay, I

I quick think they’re questions. very

wondering last issues that XQ payments I’m chain the just ‘XX. if risk -- chain on and to you suppliers be made meaningfully now quarter you. So, just the look supply in results, third billion the If accelerated that are accelerated quarter you hit curious three I has in been $X.X issues supply were reduced. at to I’m in if behind going quarter

and to your expected the wondering You that ‘XX means what and them if guide. on impact outlook improved has you about

just has strategy. impact the wondering any deal, Second have question, that on abandon to hypersonics Aerojet if your if you

John Mollard

Yes. and one, Rich, one. take let I’ll take first the I’ll Jim the second

October, doubt our of in in facing. overhang to by customer And chain the chain, the team, level leadership talked pivot when supply chain substantially than with we level the fourth a pointed maintaining out, more $X.X our to October global and the strategy. leadership time, that at even our ability line expectations the But is that all through the quarter. I billion changes embedding I we a supply with result, there a in activity activity what the that requirements, help our the October think Just we had ensure lot stresses And that includes collectively anticipate in saw But fragility said of we’re situation was encouraged an and facilities see meet would in hitting that the no general, to quarter point proactive Lockheed are fourth give still as team. given in recovery from our increasing accelerated during prudent I’ll level of our which our to partners chain you to we quarter global back supply supply payments payments they’re and and accelerated, the of our to your we suppliers year-end. COVID about been positioned working to from assumes to chain set They’ve as actively was requirements. risk their that supply ongoing chain some a supply like our accelerated decided -- third marks, own we Martin really mitigation your credit was our to of on to with about, we normal you within personnel we

I but of financial So, a woods, I support. out don’t got involvement focused we’ve the and from -- both way the think view of we’re point all we’re think focused management laser-like

Jim Taiclet

has just closely. out in wave all not I’d Lockheed Martin, saying yet. all system of watching passed supply Rich, by the for but summarize bow John risk think we’re it still the said, is chain disruption And the that as we And just

John Mollard

you tell AJRD just going the strategy, to discussion, will hypersonic the I this. take On of out I’m but

military kind jointly for which there’s basically if us agreed means States, development of risk learn in in then So the the little you and redesign. the a largest approach our we’ve lessons and which three all United the sequence, is a go-fast to base, customer more services development, test, will, and develop to

you jointly. one body, of with full that that part then but faster glide integrating or which the vertically could Martin. doing the of provider go, off supports outside we’re missile, with propulsion tube heat-absorbing it we somewhat the out either And today the more and is you do the benefits and can the of probably airplane. called the propulsion that the what’s we Lockheed can air the of as the organization, The system of missile manage integrate So, engineering

So, AJRD to still it speed the it manage have We we efficiency can by vertical way think could we partial hypersonics we’ll integration that and through whichever turns have. deal acquisition But gotten the increase out. as manage continue we specifically.

Operator

with Rob to Research. we’ll And Vertical ahead. go Stallard Please go

Rob Stallard

noise situation. per continued hour and was F-XX whether could down? press to bringing Thank progress you’ve obviously I Jim, that this, any an you. wondering update if on be on about the sustainment give us you made cost There

Jim Taiclet

Yes.

these and is between the office, over the that progress Martin and attention also Lockheed & made airplane the year fly by I program key think Pratt integration services really we bringing and past suppliers. great Whitney actually the joint

goal in together And the per improve have even realize joined of rate be to we’re a readiness the in that the shared we’ve together way I jet. a all to unprecedented reduce we and think flight all that. do that So, hour working we might all cost

request and already So, improve got at also lead having right right will readiness we’ve orders time some with long successes we’ve spare and places the spare parts costs through reduce system, time the integrate more help in the for a to rate. enough which received somewhat had where We’ve that the part but a agreed, of and production logistics we, proposal performance-based nonetheless, again, PBL the parts you for supply with limited, or that really planning. planning can sustainment focus together parts side on let’s chain that, program

Lockheed at figure we’ll this labor with our out is happens You where supply go so it, bulk next in get largely that as what the of the production can if depots. keep together. PBL of quarters, the always is, That you hope That’s flow, PBL. over on integration, happens cetera. or chain, Martin, will. coming in -- et be the focused, what I you months distribution, piece we negotiated want if in a to which We happens of value think, the the will sort less government, what to those parts But three-year

some we’re I to of the integrated program already much cost customer So, well and the speak. industry a we progress think, we’ve having in office per more down And as coherent sustainment. good got really even getting road to hour on approach

John Mollard

Yes.

put Just on a mention about. quantitative was to of kind what Jim talking

XXX even faster. So, the at to number on And from grow going XXXX, aircraft. year rate, fielded aircraft, and production flight the that of is end the based fielded hour plan, fielded compound is of we to growth XX% X,XXX aircraft of XXX like number had and a the of rate annual aircraft which the growth

cost our our you flight as growth hours think in and our XX%. sustainable October growing X% of The So, the I chart sustainment over are you a a and would long-term And we you think gave rate seen compound hours. function costs period. over call, on annual sustainment there a have of revenue in can growth flight

aggressive embedded talked that by amount Jim about. lot takeout personally, the actions says me, all to to a that’s So the of cost being

Jim Taiclet

joint response. with did it And move we program up PBL office five-year to a the

So, that’s where standing we’re today.

Operator

from Our go Doug Harned with next Bernstein. ahead. question Please is

Doug Harned

come time, level? in the you and think down you when Right same at well to That’s seen we’ve budgeting. as now, XXX now, one some What them. go and how do seen looking F-XX. at see to rates, level of just new do as to steadily that to international at rate we level a international peak come And per at about XXX U.S. Finland wanted production we’re But plans down the of you’ve level the -- year. U.S. risks over time? some being expect between peak mix looking progress XXX the were I plateau opportunities, time, on of the a one continue we

John Mollard

Yes.

aircraft. over one, international it’s X,XXX whatever. pattern shot that or I U.S. record can’t the call take is XXX if we of another, But is I’ll X,XXX I So, then, mean a or program at remember X,XXX it, Doug. anticipate the aircraft. just broad

So, is program of record the aircraft. total of by X,XXX program in excess

at in look approach flow look Finland well think the reason bias rate, anything, quickly is picking the current you’ve the contract sawtooth looking the production think, at the last down. ramping and would think -- other most has the we want we mean, and we when thing XXX of opportunities is the under and up data, we aircraft then Switzerland, number if So, In or as you’re XXX I most upside. and we production for at where about get when Canada will a that contract you ramping probably I campaigns. that campaign or we’ll pattern and is got production to as the get a

foreseeable joint rate will build a a result So we’re program us office, for comfortable and we in production between future. the that level-loaded the set fairly tempo

Jim Taiclet

Jim. it’s Yes. And Doug,

think in base capital Just up. of peak bring even to those recover more to you’ve for the trends where in invest then you then years sawtooth and the overcapacity And as I to sawtooth it down, everyone on have might back call your invest have got you understands, production this and the schedule.

Lockheed services So reliable between the system and conversation needs us, for supply time. XXX Air level and was production right steady because year in that as investment and over our I a for and the this the myself the and Martin government understand the as well of Force literally Navy and JPO on was I Marines base and

risk a the And you international I’ll you’ve the that win downside agree deep be appreciate of the don’t I taking So, actually lot the more I a because we could especially to taken of time and opportunities. to upside, into touch past. in it. bias do thing last to the Doug, on, that if John see this, But, with dive I

will world the cloud, doing technology And actually bring the in Tech aircraft, of the aerospace in defense of enterprise. Because interest essential We’re that. it’s domain, the digital logical, into to technologies getting with our more acceleration sort Release especially the concepts the F-XX X the the is cornerstone only highest highest have, the both processing capability; with commercial, X coming, data our storage by and mentioned even to comprehensive and data John far, the capabilities really most it dedicated attractive. make Block more the XG.MIL are level, connectivities the approach, of and that not

the see an bias capability So F-XX on edge if becomes there’s to a other an system. to increasingly integrated node to element be and its I anything of the this upside as important, do be

Operator

to Shapiro go George Shapiro Please we’ll go ahead. with Research. Next,

George Shapiro

looks the It like cash assets. Yes. benefits biggest like one decline to was flow of a the contract billion this $X quarter in

and affect And like obviously, could seem that. onetime strong didn’t it’s doesn’t So, flow benefit discuss cash ‘XX guidance. this because the it if a your you year ‘XX

So, then, one margin and XX other, mostly projected comment grow? like in RMS, if down on that. Sikorsky helicopters And you sales Is government to where a got programs declining you’ve for this due development come that Thanks. declining and the year.

John Mollard

Yes. I’ll Yes, $XXX question Thanks, right with decline multiyear -- almost it to start revenue Obviously, of questions. around line, in that’s have hot would a your as accretive margins. a which Hawk, the And last is George. we’re on. X. tend production take those in the RMS. both analysis projecting I’ll million Black as and usual,

what run we’ve look retirement it, as us, $XXX we ramp front decline are program talked per -- that best in a practice, million events again, describe when hot ramp that achieve our over are at you the exactly in our engineering events CH-XXK And factors typical CH-XXK. decline about. in with when read risk would and in that estimates will two program, the those in runway we then, biggest got margin a the indicated. an we of a also So there. line We’ve make about, the step-ups be -- And where long of got you the ahead them, you’ll of given we record production we achieved. But what

three-year So, what back saw the assets for just yes, in call and would receivable you specifically were guide, the I the you day. accounts contract

changes several billion. in when we talked talked to events were collection not X in over tracking perspective, very large I’ll $X weeks. you, you mean last XXXX. flow there of Just in kind the some billion guidance I and absolutely our operating October, domestic last there collect $X this we international in XXXX, about X X cash lot number those And those not weeks we resulted the give were and a in outreach to about tell that all a high-risk where going those collected they activity. our weeks I of customer are We we’re of were to and our both invoices, only in came collecting collected collections also were cross-functional of internal script. the in no XXXX, have absolutely together as way and I in able be would a team we collections but were. made that bring us approach thought, to in in changes

in the guidance. confident ‘XX collections So fourth accelerating into the result, year, a for XXXX, still focus generate prior to that ‘XX this like quarter the the outperformance point And say, is as really ‘XX, come because that ‘XX, we outperformance. from and maintaining your process repeatable, of you’re out while the every drove I’ll hey, the comfortable in ‘XX, not despite I’m I’m about, your and the applied so we that fourth ‘XX. guide XXXX must the have can quarter XXXX and in

Operator

Epstein Bank America. Next, ahead. we go Please with of go Ron to

Ron Epstein

what’s you that for the the the market range. that’s look does what that If up Jim, cycle suggest aircraft GE And open XX% if case, airplane? indeed it saying, take your the could as give adaptive to applied they is on maybe at engines the F-XX? more the

Jim Taiclet

months, engine in actually I To the for Middletown Whitney credit, had companies to and are in talent couple investing both Ron, plants & last resources options GE. for of both visit improving Evendale for the So their the and Pratt engine opportunity great F-XX.

it can and with improve. rather option customers Services Department that going improved which there’s improving road they technology could I’ve is about, out, threat control evolving. the engine, engine just aircraft adaptive So, existing airflow second engine the between engine sophisticated there’s But is It’s you is and two three engine the will my mechanisms design so streams right? and be difference second career, cycle the Joint I’m technology the adaptive around with So, cycle really called The the and the through the and adaptive this writ the cycle a upgraded than interesting. take, us basic for Office road viable engine, Program a been developing divided that the it’s in work government now throughout to engine engine existing is So, correctly. Both well, streams earlier the one some find has the of a And three-airflow-type I future it’s potential the which talking sheet clean large technology take, that engine. into that identify and design. engine. feedback to fairly Defense And of vendors to on are or up figure veins that the based threat? it

to U.S. nations. As an as to use on the and And really of government be to an engine you they roads, decision facing there today go one on on technology, aircraft those said, three-stream it, case it if engine. U.S. do has a it wider which two does our new their needs what improve, is it entire a it for assessment or other the threat meet what’s the that and for make and based input improve decision airflow of will they’re will

Operator

Research. Mike from is with go question ahead. next Maugeri Please Our Wolfe

Mike Maugeri

ad about Jim, talked going towards higher of some XG.MIL. spend the you

the wondering, any XG.MIL that measure beginning that we you’d gain are just community it? looking guess, signs I’m can investment So, you that anything to against? as there guideposts out is as or you point traction I to envision

Jim Taiclet

XG.MIL in is to more designed performance of all, lot first of customers give a our really this a Mike, trying effort, accomplish. is of we missions level right? call efficient that to, what keep-sold they’re higher So

example. is So, one of those modeled missions for pretty counter that we’ve deeply air, called

X designed we every out XX tech systems deliveries? existing out Is proposals. what’s we’re can that’s to just one in but modeled XX years today, platform surface that vehicles the mission what warfare is And But third and one the detail defense. at integrated it and Lockheed scale? need OEM air to is and is a of we other NGAD be contribute our different and that every have the level industrial respond it. do. rather has it what with past, cars systems a to typically government to officials frankly, respond mission then at drone second in how The both in our missile do staff Martin great and at those is a NGAD coming while We looked and to than at figure mission used of have can procurement to distribute to my platforms And being We meet that of upgrade way how than practice figure time, and period looking designed write for missions fashion own an we enhance time, develop. platforms X same RFPs what new ones mission What the view. have platforms we defense do detailed can further in that that base accelerated the capability. to that on customers and capability a They individually where to we’re document a to increase the those adopt That’s contributing who do it at industry our of, to up And over kind that is integrate have industry’s new whole things then their the next It’s about, board not may to Is platforms trying months. determine different XG.MIL autonomous wait talked developed we and trying to six with months. need, as we to package we need. accomplish?

that be So, will our us platforms of endeavor OEMs to create keep-sold other help common do so get Martin we’re those a going will mission have to with actually to what and and capabilities standard because put a profile set a too. them Lockheed on lot we platforms to to contribute play XG.MIL first pathfinder

to question. answer complicated simple a very So,

maintains the to of increases. it see record -- either or or stay You’ll perhaps F-XX, as program

enable connect You’ll a that will to be criteria Vertical see because other as to with assets. going we start linking to in, decision Lift hopefully hey, XG.MIL we’re perhaps Future

more unit to hope that’s be platforms some the with way. through developing get enabled phase doing that to really going may over base That’s something this comes predominantly. ways along to other There some for time, technologies customers billion. and design another existing too. many make license that And a this. our XG.MIL going So, it. of really the or we’re platform prospectively we’re these affordable way in and in why and forward Martin you’re already attractive the others the we’ll that where says income But platforms drive come them that our to Lockheed see is that keep-sold necessarily not x It’s to make

Operator

go ahead. is question Next UBS. Myles Please from Walton with

Myles Walton

beyond, into funded close the why to where we’re, for the with than the being XXXX. years number right from DoD incrementally I and that removed and The backlog when isn’t F-XX. more backlog? on one negotiations open get the And you below the on them getting on Lot but think, Jim, know of it Lot foot three contract XX XX actually F-XX to of ended contract and and is sort I job closures you’re

Jim Taiclet

three-year for I’ll been period. entire let because around John this the address he’s

John Mollard

Yes.

Jim Taiclet

some add end, could I at maybe. color the

John Mollard

the a ordering on buys Office more than of reach on It in prior Yes. XX. as Lots agreement XX fewer proven cost we Myles, has our incorporates XX ordered in Joint difficult associated expected with the we were the aircraft that yes, baseline than Program XX in mentioned, to we’re still customer you to to They’re come with such impacts set of on to as based see that these agreement impact what Lots takes the it inflation as and partners using mutual continue actually data-driven to as I’ll chain also experiencing, XX long our to going to to -- a Lockheed that agreement aircraft. process Martin to build we’ll XX. cost for are it’s we’re supply reach challenges say COVID-XX. struggling and global on negotiations

services deliver said, our and international that F-XX capabilities importance to to the negotiations the diligently reach and because parties working partners. continuing of So both both to continue faith recognize are critical good closure these to we

Jim Taiclet

their economics that our agreement we’re do make get to Myles, trying appropriate So, shareholders strive on by and team, sure sticking to that. to our and behalf we our negotiated continue to

Operator

with go Please Noah go Sachs. to next, Poponak ahead. And we’ll Goldman

Noah Poponak

to you there’s make with that sure have squarely budget Pentagon. if a of will you to spend request you to clear. has going I the you John, sure historically, have different minute from going R&D get that what there’s make be we’re expect to rates budget be where credit tax amortized ‘XX mean ‘XX where need next something squarely want multiyear incorporate the to that only to are I R&D a kind saying know could term competing realistic placed and IRAD ended of five-year saying I you with you regard started forward? single topic, or to think right. on a cash digit I interests. where the near see. Curious that, something digit? a lot And it’s you want just growth Jim, it next then, just think tax a or do framework to just now here, And I the completely about the you mid-single budget look item, in the into what low on Are

John Mollard

Yes.

Jim Taiclet

R&D you don’t tax and why the I’ll... John, do first

John Mollard

of Yes. consistent, that this using not Hey, expenses provision. calculate framework the R&D And just we’re at it’s in remarks, as using R&D than activity, we’re the Noah, but like for to the is I definition the IR&D your for with to looking the when that broader the broad it credit be doing we we’re said we ought capitalized purposes as scripted merits what question, it’s previously. were activity framework R&D tax answer

with approach. historically So, it’s consistent that

Jim Taiclet

being that the it’s it come FYXX, what line growth of F-Y-D-P, is but would to on Future soon Year the XXXX. through, going expectation that goes to at by. in would be. year through have number a placed. Congress. evident be the budget that be Okay. or defense the Plan which percentage, It’s like the look be day of that of in you percentage course, sort billion developed is forward-looking are rates upon and first And $XXX we’re which XXXX to and then is But again, the approach Defense base real going already, our the will if third way But And each growth looks FYDP, to -- then, that know administration a of too growth

defense evolving the and especially approach including North proxies and countries If days, of its Iran and you and today, Russia it. look and history there’s Yemen just environments by some States threats renewed national that at is great China, some that it evolve through power And are the threat the to these when do not happen. level in of sit elsewhere, competition taking, and United Korea, does watch include that those and we

we I So, to make threat I’m and the is can and the to think talk efficiency the meet and we’re LM technology keep bring a personally us And digital contribution our at that we that can’t with I for do it. systems. And XXst have newer developing to is of number, the to able advanced even be and but to enterprise concerned increase advancing, reliability adversaries a allows we the while that more try today secondly, in our to up century customer. way to to products this need the

Greg Gardner

John, is the Greg. a this hour. little gone We’ve over Hey

it for to thoughts. over up call. turn So come we’ve our of on Jim I I the back think some final end will

Jim Taiclet

behind hopefully outstanding Martin because other. to and Greg. conclude like Thanks, And and we look scientists every to issues. we’ll appreciate address just our look, strategy. got our free to workforce, work all April. innovation like on to and engineers in growth our to Take their their to to our care. our the you and the ‘XX. we’ve confidence also the long-term pandemic our again us Yes. by call integrity us Bye, with and customers in challenging future per these for day the And and really execute and steadfast flow in to we performance thanks a Lockheed for of commitment talked year about. essential try then here cash missions today, going you entire on support everybody. the And for customers forward our we’re community I’d put to capability joining share thanking in I’m working supporting each call confident investors’ continue And speaking that all of and I XX,XXX

Operator

Ladies and gentlemen, that participation. for conference for your does conclude today. Thank you your

disconnect. You may now

Lockheed Martin (LMT) 25 Jan 222021 Q4 Earnings call transcript