- Earnings call transcript Q3 2022

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Operator

Good day and welcome everyone to the Lockheed Martin Third Quarter 2022 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 of Investor Relations. Please go ahead, sir.

Greg Gardner

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

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

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

Jim Taiclet

and as our I’m President XXXX just started all, and call welcome Maria, we outlook, review to as Thanks, tell Greg. results, excited our we expectations Good Relations of our XXXX new begin, Investor morning, to you everyone, But and before full-year thank earnings like on third service our you for for end work who Vice for who joining has quarter I’d us our XXXX. been quarterly to at preliminary at a to like our Lockheed plan with five the pleasure the years Greg, of including dedicated XX wish as thank Relations. Vice best his you in year also we all of his terrific Investor years retire announced you, of retirement. President It’s than I’d Martin, yesterday. Greg, to more the

Greg Gardner

Thank you, Jim.

Jim Taiclet

we U.S. rotorcraft await it long-term Aircraft the I’d like and We’ll selection opportunity. Army’s franchise the represent competition, to its note that growth Long-Range also a for continue Assault modernize FLRAA, fleet as is Future to known. Army’s

We is are confident that in third year’s financially Martin to had quarter, transformational and quarter increase forward strong DEFIANT today and going well its with that into X% per U.S. announcement. to Army’s margins Army’s we to the complex last and the aircraft solid accomplish earnings future, X and the operating from need the missions look a sales Lockheed share.

over few detailed results, our cash outlook, free $X.X nearly outlook minutes, remain on outstanding the information. our for and I value quarter. that of next in flow at Jay grew last $X updated customers to track the will that, In a a our review Our was of closing our shareholders quarterly backlog plans several full But and before quarter. $XXX will we billion. delivering the provide does a guidance billion, for generated metrics all we And for financial discuss provide and achieve our discussed year he We framework as trending to XXXX years. billion

residual with outlook. a return pandemic continue XXXX expect growth with now to growth challenges XXXX long our anticipate but supply XXXX equal We the approximately to sales term, chain we being over the and continuing, to impacts in

our XXXX in drive four confident beyond. growth are We to in pillars and

expanded program. XXXX through share cost capital in to of expect and and flow management, solid growth the of share combination and cash we purchase reductions throughout per working a thereafter business, deliver Importantly, free improved an

increase an billion. repurchase to of has our authorization Directors share approved Board Our to $XX

for year, Jay’s see plan increasing total a repurchase of this share expectation we’re in $X for outlook billion XXXX. our in doubling billion $X by charts that will our You outlook

also a quarter. X% this We announced increase dividend

to on in shareholders altogether, XXXX. billion track deliver So $XX approximately to we’re

new business drive our systems. long-term strong multi-billion-dollar, our strategy model-based nearly elevating allies. support enterprise and LMX and XXXX. an These customers commitment research edge, of century or with this seven-year $X will One [ph] independent also transform with a accelerate digital XXst create are One total sustained defense fully company-wide technologies, growth throughout billion build, We investments vision capital and and and key through as end-to-end of we the in transformation, expected design, will of driver to lifecycle. to program A leading product thread LMX, processes our nation is and One expenditure deliver it, commercial call our digital development to funding on a security a and integrated LM our our

ongoing of synergies anticipation identify our our our cost portfolio and part future internal stewardship we to approach, increasing As of a an review in between are the operating goal corporate areas, conducting efficiency of growth. with opportunities, general business reduction four potential review further

term growth domestic international for and a our range long strong. in confident as are We and remain wide products of demand services

to into and requirements to allocation process attractive capital drive will our balance our reinvest dynamic total We actively and meet we’ll drive sheet disciplined customers’ continue to use organic our returns for business capital growth, and and shareholders. strong

Joint of completes Swiss procurement F-XX book a a over $X.X month, Switzerland The XXXX signing contractual in offer the shared beginning enabling and when milestone of signed quarter. the as key the F-XX makes future authorization procurement our that the highlight the areas, This from to third for of selection an recognize was XX like government the us from to the and I’d and quarter of Council Program of as from Lot XX we revenues its its in announced F-XX Office, accomplishments the received order on for letter government-to-government first XXth second billion business a well with Federal earnings August, June each customer. Also, fighter. officially process F-XXAs. few our Swiss on, update acceptance Last program. Moving from the

the and Force warning, Space the Space with successful in satellite, Our one intelligence the deployment of system and of an running signature integrated GEO-X programs, infrared spacecraft longest has final constellation. for SBIRS battlespace gathering. system missile our team the celebrated providing been the SBIRS awareness, space-based launch

also will business SEAHAWK OPIR this or mission program, important generation to from We Persistent more and missile of advanced will next order line continue our Sikorsky Mission Infrared to secured the which At Ministry for more and even deliver helicopters Rotary Australian the next Systems, warning the Defense. through Overhead gen XX capabilities advance support and an survivable of country.

in this Control, the approved international the more backlog. a THAAD opportunity United including air The the sale significantly XX past Arab operates to batteries, billion. UAE the defense interceptors. State and years, over Emirates systems, and missile Over for U.S. customers $X.X and capabilities, THAAD their over worth than once increase two Missiles with potential Fire we’ve would Department XX a X,XXX finalized, remaining in and SEAHAWKs be two And both currently to delivered XX could and

Turning advanced Appropriation to of Department have XXXX both in year chambers budgets, budgets. of bills of Congress Defense fiscal support

resolution federal operating have prior funding support to to funds under seen congressional bipartisan has a term increased Final continuing is authorization currently approving XXXX DOD FY and strong passed, committees. We for yet for and the government legislation levels. defense be in appropriation short these limiting FYXX, funding

in continuing effort CR Ukraine in their support and added a this country. for to billion. Ukraine part provide of to amount for military defense equipment, approve weapons, additional Security funding to for The the As Initiatives, the the $X bringing did supplemental billion $X Congress total resolution, of spending program efforts support Assistance to Ukraine, appropriated

billion production appropriated billion resolution increased to continuing to a their increase on the The stocks global $X world planned of the to security also presidential has defense addition, In announced total. sent in budget replenish increased five-year funding with beginning to of increase international focus over having across billion with funding drawdown since having community critical authority of approximately munitions the of in equipment Ukraine $XX now and a the U.S. been year. nations $XX

have have multiple products manufacturing consideration. We offers expand the for of to continue customers with submitted discussions and to

fully address a actions signature in great we time and While technologies challenges many programs have implemented, by early of to power the us security XXst our resurgence the believe and these positioned global contracting may take to century competition. in stages presented well be remain

in Black drones efficiencies an Lockheed technology, at that, Connecticut to nearly performance by capture and data Lockheed aircraft our and the XX%. technologies showed AT&T to providing of surveillance using introduced multi-site in flying receiving task the security performance Martin base our Martin’s processing adversarial network the and way this with XG and shortening and to the like to aircraft intelligence, Martin simulated transfer technologies capabilities was answer to this XG of During battlefield. service the and capabilities questions. private performance you also and location enhance out I our the Turning mission to both effective flight total our Operational enhanced pilot how and your call network. station leadership improved cellular Operations? to to all Martin’s XG.MIL together, With bridge an Colorado, commercial the Also This Lockheed Verizon flight enabled from quarter, and over to Hawk turn of XXst strategy, UH-XXM Jay I’d time Lockheed in high real open and highlight with deterrent actual and join drive data be demonstration to time All-Domain AT&T military transfer positions. used two enabling members examples Joint deterrence century to can quarter, XG.MIL helicopter teamed geolocate speed, the will reconnaissance by securely the third later flew hybrid architecture and further from

Jay Malave

everyone. well results, area our you morning, an walk good as detail, thoughts offer some as Today, and provide XXXX I XXXX will consolidated update beyond. through on and Jim, Thanks to our business outlook

please results, posted our web I As today. earnings our we with have with release highlight along the follow charts

X the X% To Let’s solid sequential of financials. overview generated delivered begin sales of results Martin growth consolidated quarter for we chart and start, Lockheed to with third our billion of $XX.X an performance Segment mark to was anticipated. an profit $X.X as underlying that XX.X% $X.XX market solid absorbed per reflecting margin share headwinds. billion, earnings at $X.XX, with of operating quarter.

the with and ratio, action. by strategy driven a XX cash at cash the Free also dynamic We billion, increased billion dividends. $X.X enabling quarter and purchases deployment was execution over our backlog Lot share flow book-to-bill contract of $X in production returning disciplined through the F-XX and strong further X.X

results areas. X. from X% up on operating than was and the Segment sales third growth with earnings chart step-ups last consolidated benefits more our profit and four Total operating to offset volume XXXX three the of increased sales quarter slightly, lower in than higher as segment year. of profit equity from Turning business

operating higher higher transaction transfer X%, meet and per pension and Moving On mark lower share on All to commitments. reflecting all, basis, to were market our the results benefits a primarily by last of EPS in that per $X.XX. share solid earnings year’s well to for position profit grew X. chart reported earnings accounting, the count. share Adjusting us full-year

flow our Shareholder cash this with continues on repurchases. strong chart free $X.X accelerated through with delivered XXX% $X.X cash exceed dividends Moving to cash cash of free maintaining while year-to-date, to flow deployed suppliers. quarter cash strongest flow billion we flow share cash year-to-date billion of flow collections free payments in X, driving deployment to of quarter and

substantially $X -- buyback original completed We XXXX our target. have our $X billion billion

paying we quarter, of our dividend now also $XX announced an per As share. increased annualized this dividend we X%,

results segment X. starting on with Moving and chart Aeronautics to

at in quarter year-over-year, offset driven XX primarily second $XXX associated of on million Lot including volume contributed recognition following also classified profit volume programs. sales growth. production the programs on increased F-XX action. X%, Works that lower increases Operating of increased classified sales partially sales higher the by the X% contract volume, to margins the with were F-XX, from Increased quarter deferred our Skunk Third the by

profit driven Operating profit adjustments Black page Sikorsky Control production favorable X, and XX%, on Mission Rotary the as profit volume driven than Moving and volume on year-over-year volume adjustments following at quarter benefit X% decreased operating to and X%, interceptors. increased this increased Segment was volume. X. sales Sikorsky. Hawk Missiles program. lower more this quarter primarily profit At Systems PAC-X Black primarily offset Sales Hawk on the down lower by Fire page higher production from decreased on by favorable by X%, lower

were following increased Operating Sales higher United volume ramp Turning equity primarily Launch to by the area. XX% with earnings interceptor the next-generation continued X%, chart business program. driven Alliance. XX in our increase, the profit Space along from of up

Okay.

Moving on to XXXX outlook updated our XX. for page

from guidance earnings flow. share our last per are free We for sales, cash maintaining quarter and

increase $X of With the billion amplifying reflecting share our long-term the an morning for growth outlook our of prior and repurchase share per confidence approximately approved expectation, Board announcement $XX year, $X the creation. this billion Directors, of we’ve by value authorization to forecast our buybacks a billion for increased from in our

takes headwinds our out outlook for incremental are for EPS did XX, We consolidated therefore by find expect year. expectations in can third our some buybacks offset our holding preliminary the current be benefit puts this not of charts. year the $XX.XX EPS between from and Also, planned On while have mark-to-market guide change, and the the our quarter to you business and we’ve laid we did XXXX. backlog chart that areas, of framework detail our

backlog shortages points gradual to sales As remain are of growth however, delayed we’ve XXXX. basis is will programs, discussed further be expect backlog do segment by contract XXXX, programs higher classified previously we programs XXXX confident our all overall growth, growth supply compared the to conversion record supported than hypersonics, COVID our third XX more record, in of company four along by and pressure as to be XX expected the outlook. due before, new the operating growth, quarter those margin, and year-end. by expected. expected anticipate classified chain headwinds, driven primarily awards. accompanied another in flattish through of will and we sustained our in We in with approximately In recovery of our mix pillars: sales by This businesses, This from in year the

through that can work limit synergy and confident this pressure. actions, downward are reduction We to we area business cost

flow and remain spite in pressure. for free focus the aggressive line of top unchanged expectations and Importantly, XXXX margin capital through cash our actions, management working

outstanding outstanding shareholders. prospects Looking forward, expect to Company’s share the the next several aggressive and free shares we confident value we over anticipate With our plan, we And are growth value approximately repurchasing deliver for in of cash with flow, creation. years. a buyback to XX% coupled sustained long-term our

Okay.

So, let’s wrap chart XX. up on

and shareholders. outlook for cash performance in operational area was to we and the quarter financial business Our return solid, third increasing our are

We continue Security. customers’ including our to in Century important XXst technologies of invest commercial support in missions and innovative solutions,

combined Our value to our and strategy with dynamic sheet deployment robust focus capital remains deliver on us strong balance long-term generation, to discipline and cash shareholders. allow and

UTX the We an of end us next that, the phase open transition in Gardner life. the that together. dedicated to to for through him we brings contributions well would to of also Greg experience he open joining is Ricciardone John, financial has we XX up Q&A, I to thought both Company. Q&A. outstanding from Lee. She’s and Maria will like and excited thank his to up been team. Maria remain call she service an all partner Relations He’s Before year Greg the resource years the his executive Investor multiple where excellent supported. wish with and the that partner, and companies, worked let’s With including I’m for of

Operator

with [Operator first, Research. line Rob have Stallard of go Instructions] And we ahead. Please Vertical

Rob Stallard

not Maria, on welcome, you’re to XXXX, all for in and questions, detail of to Greg, again. Jay, go terms lot two be that here, a Thanks going classified your say be so know I going be best overall outlook Also, are of up quarter. I’d is Good the to you but guidance full But morning. next you to But much. going going into flattish. the going of mentioned

year, and So, down next what’s causing what’s that? coming

Jay Malave

Yes.

through go be to F-XX. And the -- year, bit around to of look little the flat on back areas really you program the there. transitions, next volume just down production being give slightly. that color expect business you that’s to a at range of in we the probably lower on Rob. down some We And I’ll aero maybe some When maybe have of of

to the that -- We be or and though deliveries in be XXXX expect of -- recorded sales done will in even advance flat. procurement lead sales that generally long We XXXX. with

a be aero for period So, on it catch-up there. sales will of

some timing, So, in MFC, we’ve that’s them abate to some we biggest expect that slightly when low-single-digit At some down our there, driven at other programs sensors driver security got at so but are business just program particularly going be XXXX. we our expect to into both got probably be programs. the expect -- flattish timing, business, we’ll go to we to RMS we’ve national just is down, but up new well. and RMS Space. Space, growth And then, And -- spiking be there. as that we by will growth And -- have

And segment. so, that’s driving say, area what’s it, generally business by I’d by and

others, our flat. be So and slightly few down in up and will in slightly a balance

Operator

Ron from next Bank with America. of question Please our is And go Epstein ahead.

Ron Epstein

XXXX? can year in the more scratched a you F-XX. what, maybe my there to think is XXth of so. you’ve be on And things some that? got, like next going within walk the looks growth Jim, bunch you what again even might or one head is It the for mean, through I underlies start I why customer

that go how growth to So, where do we why F-XX that? levels higher? production today? they could than underlie about are they higher And rate are think of a recovery? at going What’s And

Jim Taiclet

Ryan, here. Jim Sure. it’s

four more of continue feel. into all on. record, parts F-XX a So, have. the of more piece sustainment, the X biggest And -- of number programs is we from And or we those support, of going years. right? of overhaul, kinds a those spare of record there’s One going going out to flying, are be going a identifiable with X And that’s So over areas. aircraft repair, come classified to to those in business meaningly and very the to two activities, XXXX to to again, biggest the pillars of are programs speak XXXX of going a ramp second, pieces both up our and are of I’ll few growth of the

Europe is in various of parts PAC-X. In Asia now, a is world, for East, interest the area. There’s So PAC-X MFC, the the Middle F-XX and growth sustainment resurging.

the defense that to of are really going be couple system including to next kicking capability in significantly, XXXX. years, with going up air similarly, rate international Along other that, capabilities And to far that time missile some in to I interest move production been fleet there. that’s gear And for Trident programs exceeds time XXXX. uptake fourth into even any goes ballistic additional fleet do the is of is built the for record many the more CH-XXK of franchise history. that revamp of in the lift is on. it’s, among that starting and as That think, aircraft again the And there’s grow, essentially will U.S. Company continue can Martin the So that grow the in going ever the system. Navy will to going a the missile ballistic Lockheed second that’s get

On in side, ramp come really helpful, but is the XXXX the XXXX. classified not will that

at record programs between that U.S. bulk and priorities its the what of are forward. of macro On got growth. determine the government level budget get going has kind So, the to classified, of going to F-XX, you’re

One of nuclear those has deterrents. been

ground-based support get about we a between make up the the services issue another bomber based And per supply aircraft takes starting I I that can with support, And recommended, the again that’s X revitalization. for forward. back time think going congressional the up with aircraft to XX it missile to year the recapitalization the government. that better that and going when that’s significant demand would COVID steady years, to look U.S. to number be the or it’s to to frame on for a happen XXXX to coming XXX budget be between of or the conventional for X XX so, so to U.S. the the XX as on our We of international X, processes going think U.S. the next the -- going recovery rate a instead that supportable. amount and President’s in into along program, from budget chain. production forward committee we authorization and try see appropriation the nuclear and government be international. the And budgets and But of We’ve I threats there’s spent also proportionately gotten ballistic just missile defense mentioned, worse fleet have

So, for we that. hope

that’s We that we because where But think in it we expect again, full is program to going and the F-XX the that’s need, have ramp-up go. won’t FYXX, yet.

Jay Malave

just to add well, me as Ron. maybe little bit -- it a to Let

abating in on augment, XXXX. our that some record. programs mentioned of That’s to expected chain. Just supply into Jim we the of we’re got we’ve things go affected headwinds bit XXXX, primarily seeing a when some little

those so, XXXX. get time should to lift we And by the

when We also also transitions have we a comparison allow program in XXXX XXXX. into that few will for get easier

for the will will the just We’ll allow so into which accelerated And our mentioned I get see F-XX we when mentioned. down grow, F-XX production XXXX, be as sustainment growth normalize to will Those where program. next year. example, in Jim also

to are Space, As expect mentioned, that grow. recall, as program that that NGI slipped Jim accelerate. XXXX, such but you may continue the other will in In FBM, programs to right, to we as there

on see cycling classified Defense at programs those And programs this growth We’ll so even into as mentioned and programs as again, GEO program. will some also there years. we in mentioned, Similarly, growth then as down as the -- also those we’ve XXXX next-gen on And the Guam some got at like XXXX. CH-XXK, drive Jim of RMS, or program OPIR, we’re Domain-type well radar Joint PAC-X well. that things Jim like other SBIRS things in headwinds where All will on the also MFC, as get there’s continued abate

programs that So, to months there chain. XX in all now They and occur. is to. obviously ones visibility That’s we improvement the assume we improvement that expect clear these that for are an do areas to of these pretty have abatement from supply

Operator

Wells is question Akers Please Fargo. with Our from Matt go ahead. next

Matt Akers

Lift, best might FLRAA, from that? there with do wanted up? ask about what And contract delays? when that any your Greg, and of luck And think just driving the on indication Vertical customers working of what’s hearing you you. you’re I be to good Future

Jim Taiclet

is thing what FLRAA only Jim. the The about out publicly. it’s for U.S. puts Matt, could decision we say schedule government the

want It’s their and of a line, schedule actually to to they some in having have And offer. been them. think anything I flew heck do around a below fly. They forward like don’t we’ve in maneuverable you of So, speed time, we FLRAA and line. There’s to look these couple else it. be can amazing that. out me pilots the on when to you how a be tree a And it. Air YouTube low. also terrific the They also this times want that to my of you helicopter video They it I’ve add with to and XXX-knot put And XXX- can technology the seen at Force time we helicopter is. gets scared up FARA shows when you need

it gives a rotorcraft of you’re So, best the business the worlds if as flyer. both in

than You many it And good speed the that’s rotors. traditionally you could because designed of the traditional have a also for ever of helicopters even maneuverability gives faster our get forward helicopter than it’s better been counter-rotating provided.

on to it’s the But think Army going we to be government pilot, or come U.S. up it. that. and service we other the actual see schedule it’s the theirs, really frontline where the out and can’t comment So, on best for solution they is

Operator

ahead. Alembic Pete go Advisors. Please Skibitski we’ll to go Next, Global with

Pete Skibitski

instance, we seemed question Greg, last PAC-X. few enjoy on feel down, it of range like resurgence being U.S.A., been hypersonic of a HIMARS, and midterm -- mentioned the years, of and the But the development guys this have positive production like to Fire Control. in this some were Missiles in them versus about you’ve programs pretty what in resurgence the had one retirement. at guys there projects? there production papers. on Control Jim, whereas I for if production maybe the the the seen And but you margin Missiles the back now had production think a programs, is of programs, I of kind Fire that shift start a kind opportunity programs because of you we’ve are seeing, with

Jim Taiclet

So, programs fairly yes, the margin were say, Pete, the effective are high still but already down. legacy extremely the learning because curve of and that I’d volume MFC

those further. ahead to volumes upside increase this. will margin should And So be gotten a we’ve that us, of

we the and just happen got news basically and officials Eastern of GMLRS, asked these HIMARS, for to in of over already. you you X, to again, ago letter these a as beginning in So, Javelin, products a in see about. lot others when spending And went the kind days a About including done months the capacity what on was took well. for few a visit X I the senior Europe, we’ve of the start Pentagon we’re systems, them and said, now going some to ones few saw

to was just or manufacturing without lead We from any back shorten or and memo a government. year. advanced contract time. with the whatnot example, to for So on these of long production supply did went increasing lead That happen. we’ve we chain specifically, ahead in for the ahead units plan even already XX HIMARS contract to other that because met expected million our a We funded of $XX it

are now. those parts being manufactured already So,

we we’re lines. determined we we’ve it workforce and to to facility early, up bunch produce third of able cross-training manufacturing skilled The the another product could ready thing products and did was modern got where our a across open be

back was product of comes, did ramp products we’re lines these to of going between move One over years, grows putting we going that across it some quicker. the people when to And them. newest we’re So, and the so and then, that have into some few the the last pivot thing kind this can we first technology LMX, to next manufacturing best these as the fungibly shifts demand of

and stocks, being actually to done things refill capture remarks, the I also earlier of of do volume the some we to from some get. both prepared And as are shown. that those we’ve So, mentioned expect the expect in we to the U.S. to significant it, interest get

for and especially them. call, it’s years get that it’s there, know is which it contracted, discussed FMS demand countries officials senior as from Now, done, -- for to all we a know get those we’ve go that can important we is take an got But couple of the the contract. ahead to this last that government to and spoken

Jay Malave

We to in cycle that. given in That done expect of there probably some the on on -- starting follow that we XXXX that some is mentioned. long fact of Jim advanced funding. Just programs are up the likely where Pete, do nature in of -- some these time frame be we’ve just sales upside to the spite

I to of that the just MFC. lot where that see The other margin at we have a is is pressure also year, mention next driven thing

down quarter And in so, it see we’ll from is quarter, What’s see new will our And third and that about more programs, higher-margin of these is, about XXXX. given XXXX, step they high-XXs. XXXX XX.X. while from benefit increases we’ve that range, some that invested mix ballpark, implied the for fourth these a a in in. XXXX way in to this the the think be mid-XX in programs probably in in associated year They’re going in to we is the beyond. guide MFC are for that where did

see really beyond. so, benefits But And back and of see ‘XX company, driven we’ll come by mix us again, pressure those little in the of there some to across a bit MFC. we’ll

Operator

we’ll Jefferies. to Next, go with Kahyaoglu Please Sheila go ahead.

Sheila Kahyaoglu

deployment authorization? increase want cash of of to one Can And taking you needing debt? of about dividend talk Jay. market in and you adjacent with R&D -- the raise. repurchase opportunity prime forward? best share potentially made expected that, how Greg. tax with these use some percentage And you. I how to think And the and about assumptions in down as for you. share along ask Thank as Thank maybe, Thank prime, coming about multiples free just perhaps about what a the companies thinking think were going the that Jay, smaller repurchase luck, you’re of maybe pair you. authorization advantage to And you about some Jim you good up around flow the of do of the morning, credit

Jay Malave

Okay. a There’s there. lot

So, start with let me share repurchase. maybe the

of in in As think And about going as $X we that creation a and point. remarks, quarter. long-term here $X billion in fourth no really value in I forward as see Jim and quarter, I over $X we’re than to saw outlook our the really saw The started time opportunity in an billion better to mentioned $X is XXXX, mentioned Company. the billion on billion XXXX here prepared to now that in -- both the the in XXXX the maybe term. starting long fourth this we profile the get We amplify confident

profile the be. expect we to it that’s so, And should

as far repurchase debt, fourth to we going with -- are do program this finance As the issuance quarter debt. of share

That it accretive. billion. year. our increase will next So, But be again, interest all about will it’s $X expense

And leverage -- ratio still at EBITDA we’ll our debt an X.X put Again, basis times. that. so, below on below or see us will

also very and it’s very So, attractive. supportable still

as as capitalization, R&D As in the see moment. we what quarter. We’ll tax changed happens really the the move nothing’s at far here forward fourth

then believe have that we we And the the things we would type deferral And innovation. through of and as or you legislation, to December know, capitalization repeal see expiration support that prefer the of include what to remove either there’s would resolution of that sound could some therefore, through promote a first, possible policy. It’s tax XXth. November on bipartisan new policy, extenders elections. that we any believe First we existing disincentives it’s got task we a movement get the continuing on budget

And we’ll so, push that’s a something continue that for. to firm behind and we’re firmly policy. It’s

Jim Taiclet

investments when a that Sheila, are originally. scale. under I for house made VC team million commercial had Martin, funded literally One to describe inside about we $XXX now set worth Lockheed years, pair smaller like Martin. at midsized that which of is to been of $XXX now The up are that whether and been authorization million. we’ve ready level defense, have and Ventures, LM industrial-based up It’s comes ways for teaming in with it with companies or Lockheed companies we’re they’re can up that. up small three

a we ago, little joined even So the mark if market basically the investment. Seeing initial XXX% program a ahead company lower, I on LM Ventures doubled bit of to years of when we couple the had went that success we the authorization. return

that Martin or it way? do the At how defense I midsized of that next LM et or Ventures. joint co-invest, invest the side different, motivated can companies, go looking fund creative at that’s say, we the a the And early-stage level, VC to and side our a commercial alliances Evolve and ways take and rate what or industrial where step cetera, outside whether $XXX team, commercial on we Lockheed again, with manage us there and more we’re what in industry structure in base it we’re space the meant with E-V-O-L-V-E. So, in So, LM call companies. space do in do create ventures another Evolve, we is Jay can to higher now helped to or million

framework, and level structure acquire space midsized ground, to in ability which We’re we LM the something supply Evolve, investment years in medium small off are companies done just getting page the we’ve the say. that chain literally critical thirdly, But the with technologies And I’ll then have the over now. is or the engage that and components is -- of with available.

that continue as we’ll well. to So, do

kind up that Ventures, and bring an the So, to routes have running: Martin. -- or those are in affiliation Lockheed LM and Evolve of three the LM acquisition those we place with process capabilities into

Operator

to Melius Please we’ll Rob next, ahead. go Spingarn And with Research. go

Rob Spingarn

of of high-level to carrier I The at you’re wings Air you and a shortage least Jim, is ask to XX% Greg. facing luck, the planning particularly have pilots, because air of the a a is Best uncrewed. pilot. question, Force Navy wanted

plans and strong the ask the the Force to And into manned that aircraft, wanted that so, and given Air so Navy. is and unmanned about there how Lockheed you long-term both of fits on the I positioning

Jim Taiclet

easy approved Martin But and XXst that Sikorsky, other easy some Company, years, to So Skunk was on the Sikorsky, UTC to of autonomy thing the parts we is part technologies in an not or And quite been Works century. everyone’s in Lockheed XX get to XX-plus company, This investing when is the Rob, credit right? X time. or we’ve an are working been at and of think including and autonomy thing it essential regulated. of autonomy in do the had for for thereafter, critical

from but because can’t as So, that, I But the call, crewed, have classified. there, talk pretty we detail, get teaming. I actually it, say Aviation But flown it. far to which like said. want is or It it, And then, about much on down done and January get in Matrix that it’s modes. ago I’ll road the helicopter. Week side out rotorcraft -- DARPA Aeronautics expect in on that’s helicopter, people explain And just we’re you project side, in around in maybe a has the the of with of out about Sikorsky. a testing It more to by that work, we highly able right? months uncrewed Sikorsky to in the mainly run manual X it, traditional no some I’ve a any call has hit of we they X helicopter couple we’re flying the showed we far the the milestones mode, road way. three of all Works, three if before is Skunk the be down One

come off, it want change take The then, -- down so second land flight assisted you the like the up mission So, go you at is need itself. do back mode plug in sort if to will is to trailer And fully of mode can take And you over if the instantly. and Tesla, a to the on third Stratford, mission Connecticut, right? a you or and speak, or thing automated.

really a of to ready technologies be the turn programs these is when then, are. So, of matter it’s ready already. record, working when they is the it’s service we’ll and And but U.S. government into

Operator

ahead. Our go with next Rumohr Cowen. Please von is question from Cai

Cai von Rumohr

Yes.

Let me done. Maria, you, Greg, welcome. everybody and great a say for And join job thank

the assuming So, And big know, talked inflation. guys you we not Senator signed. the contracts that’s the to that haven’t about anticipated saying forward? LaPlante when surprise, kind and not has is because companies help seeing current good basically were Warren, you going no a Elizabeth in suggested was yet inflation should -- And kick where of level as are of What inflation Bill in DoD idea.

you are support? seeing assuming terms in of what inflation? what forward So going in you DoD And are

Jay Malave

twofold: we price. in and fair not of Sure, front a labor fixed one own amount insulated Cai. our is then business And is supply that’s chain. for Inflation see business it’s portfolio somewhat on in because of our our what

get, the of cost-plus Lockheed some is so, Martin. that we that benefits held And not risk at

of commitment business actions of of is supply customer, our duration going that XX% fixed commit lot back over our supply contract with chain, around implementations that our have For contracting that same chain period to our to price, just of time with and revolve whatever in back same meaning policies a and we to we the time. the our our that us

we’re either. in does don’t into of going our and as risk so But And those customer. bids cases, bear many come that new factor it with into we proposals

both proposals. on in and impact we’re really does front We bid side the going changes and of supply different in keep chain, are we something forward seeing customer. with an And have the us. it that have dialogues and It’s labor to on having

to have going which bit to would shift be I our to acceptance do that’s difficult of that As our But availability, certainly somewhat dialogue part DoD we that economic think there’s part In continue a to that’s contracts, obtain. little funding has been actually of of forward, subject contracting. and as of price adjustments, in existing as been with something negotiations something that’s you customers policy far and a on. mentioned, our

have absorb far other our labor actions. reserve is assumptions increased backlog type We’ve we and concerned, through existing that contracts. to productivity management been our in As as able of

certainly go So, seen item there, impact it’s we’ve really of not an much forward. we watch as but a

Operator

Next, with to Seifman Please Seth we’ll ahead. Morgan. JP go go

Seth Seifman

I to echo everyone and Greg to in Maria. best

two to sneak Going real quick. and try in here

how about XXXX Is wonder Jay, in thinking the remaining you just kind XXXX right? both Is And should help could coming that the one, that has single think the Wall that the and how then off should FAS we saying growth beyond Just CAS second for and years. that CAS. it? about us Street this in And then trails if outlook you with next Journal morning -- be outlook digits. I pension year, low on balance the of

Jay Malave

to to upside that We look opportunities Sure, a are single some Seth. on this that opportunities baseline. programs. talked Yes, HIMARS there certainly is is XXXX a way I call and digit the other Missiles for it. opportunity. baseline Fire and at as about today you Control low think prime talked Jim related should

our there customers. be DoD are upside ongoing are where dialogues with today. having And from we’re could These so, we

to really deliveries. a of terms firm of and put forecast going it’s clearer be timing So, to them we picture into those in under the ourselves what’s contract get hard a until

would I level So, baseline appropriate say is be. the low to single-digit

provide come January, clarity we’ll getting We’re a a more outlook clarity XXXX our XXXX. lot for I and on better full better and think guidance have

do involved, pension’s the as we far expect come As down. FAS to income

say You’re $XX million. of talking in the range

On by million. side, the cost well $XX to expect the we as about down CAS come CAS

we in, we’re $XXX FAS/CAS by That’s if today. adjustment expecting down all to about come struck the things million. So

end of the As we and we’ll year, formally up today. based you see true at know, on but the change, have what to that’s

CAS in As going Seth is have you get ‘XX on that. Greg and far that. back involved, as you to beyond to to back we’re will in to have to come

Operator

Stanley. Please ahead. go Next from question Kristine Morgan is with Liwag

Kristine Liwag

the you mid-single on another defense The budget up military aid for to digit. pretty thank robust. We is so specific adds XXXX. request ‘XX modernization ‘XX for budget. and and But view, the environment in maybe welcome, congratulations, budget headwinds far the the XX% Greg, Maria. Ukraine a color Jim step back a XX,XXX-foot Jay, taking saw providing

could items So, XXXX these that your guess called I year-to-date out. the book-to-bill thought have specific also you headwinds is I X.Xx. offset would have

specific the the grow you So expect the the programs low portfolio above to in with or we mentioned, overall absent maybe budget? line should DoD

Jim Taiclet

it So and the yet, what take back so Now, President’s hasn’t go putting it we that happened that that I reemphasize have expect into in programs forecast. morning. And probably said, don’t all, a would our good we’re C-XXX it to back first we not and of production. me few let beyond Jay just step from Kristine, months will in an fourth budget next would couple the that to really XXXX, the information a a expected early benefit if minute and point But the what original submission would was trend just I much of right? in defense out that and say, is -- more give year. includes to right and happens, in do quarter now even year and than real that in estimate be F-XX the enough happen, even of that the to of above what

January starting to So in doing that’s formal. we’re XXXX, guidance start going

in clarity what what’s I’ll to of going just couple be. And raised that. In is of the to the the to spike going don’t and as we get as in that. learned you what come as put along increase defense into have it’s budget with ahead major a just you be, in and on. finally, contracts have from orders if defense of One budget, then anything our supply time, necessarily We is winter have do don’t not pointing there issues mix that chain. the the COVID XXXX the that budget my January, the going tell because effects to you’re there’s because yet be we’ll status be. the what we’re And like going know three I’ve in of that minute in management of another even don’t years what status We’re the chain was supply ago. budget last the And that, again we going far what’s know is which going to then contracts health to out, here, orders

defense you almost and by think, not COVID, the now. issues year. when those tradition -- not way, really no been company but But X% confidence it, impossible there’s I the the a three to which was was So, really information, that’s situation the budget has -- rising high there give at trending XX% makes that’s a to

this. next without give trend XXXX So, line you products because the of October. in But Navy we Force, Hunter on to that, Having international commercial Andrew contracts that in formal start solid all of Jan of but to Air can is Air right? gears really the a going through, secretaries in I the we’re lower We’ll you this happen. to cycle time guidance trying started. even that engaged are all as we in Army start has LaPlante call a give get the some happen, a into get government engaging The increases of on last making now production. can have to So, to initially, lot inside there et too. clutch take to cetera, on we I’d used the I the come process does fully others give it so us, paperwork that been and going Dr. engaged characterize actions is the way and order departments the anticipate and it the needs yet wasn’t FMS even it analogy make because of credit, and to Force, are sales, actually clutch process especially of said

really already Kristine, it’s So to that for cycle -- for going the to us at there. in as sure up what of Black this pretty benefit. all But is we’ve and those talked F-XX. F-XX in Many what would hard are really well internationally I’m ginning be about. C-XXX and estimate products, as programs reasons, especially the point MFC demand Hawk

a So the I defense can where with additional think Company there’s an benefit budget areas significant lot of increase.

Jay Malave

Yes.

mentioned, And participate industry upside. to Jim expect, so fully Kristine, we in as this

orders than longer You’re And the in expected. little sales bit here that in a backlog. talking what the converting taking about going is that we’re to to see

of still amount lower free free share outlook cash perspective, you per a margin cash sales because told think we program. we’re outlook ago. our repurchase of in our that spite the flow the same share even I important of XXXX thing is to of the a better from remember terms has that in a And pressure, gotten delivering year flow

Operator

go with from Please Next question Baird. Peter is ahead. Arment

Peter Arment

morning, Can hear Good everyone. you Yes. me? Jim. Good morning, Jay,

Jim Taiclet

Good can. morning. we Yes,

Peter Arment

-- puts be in a should Great. flat get troughing of maybe we ‘XX. kind in thinking all Greg. comment takes story becomes kind Appreciate implying, the we other Should XXXX? or that there a but about bigger made as Aeronautics you’re kind just term? longer what Congratulations, your of Aeronautics then be and Is into of you that thinking ‘XX, about out the are about we Thanks. sustainment Hey of down of kind Jay, made slightly piece effort. to Jim

Jay Malave

so. think I Yes, No.

dealing the the that contract. which growth headwind, next production for in delivery Once we’re some profile we’re profiles that on production the on the lead program. around. moved has F-XX programs just catching to because on up the growth transition changes and delivery least -- of some growth year, side, going a think And with related I off inventory the of will they’re some in at again, see the the F-XX leveling sustainment classified to and abates,

‘XX would I in have them expect to so, trajectory. and beyond a And nice growth

Jim Taiclet

to Yes. And Defense starting briefly -- I’d major get them And DoD offering, that has really Guam. JADO well And contract organized also that’s sort the use control on of we really of come been systems speak. Peter, of first our it’s add we’re mentioned just real so the think, to called product today there, or to traction And highly one not and various some in and our capability integrating meant what by that why that’s out command the is it, I is whole drives do is and a approach. this system. current that services. integrate XG.MIL won Actually, to

Army’s provided example. by -- to So, the be for Grumman, happens Northrop

Lockheed then, number to OEMs. work we’re going from the Martin with And We’re a range and Aegis fully to into products from into and solution that system that do going to and bring the it. a incorporate other them of mix of programs

this in to We’re first on going for the way. time work together this

the be and for with see happen industry, we, success too. once these So, going of got coalesce this us, XXXX-plus the demonstrates this a it to frame, is the industry in time I real a future. will more it pathfinder and help And be has can to think opportunities that make an as

Operator

with Please Next ahead. question George Research. Shapiro is from go Shapiro

George Shapiro

questions. of couple A

margin on On question, that QX. sales Jay, provided by on that to may sales, XX%. or then, the as you added than profit be second a XX, it next you increased Aeronautics incremental the look will come And help on with supposed not sustainment? imply get in the year, more the F-XX if that you does margin F-XX working margin you the on million the Does area, and in the of Lot And now you’re at growth that well? program? is the the offset like it’s $XXX the that

Jay Malave

the Well, on question, F-XX the we and adjustment second George, profit a production program program there. did the on have

we moving forward there. So, a recurring higher will rate see margin

wouldn’t at over in expect QX quarter, far do As do F-XX, Lot in that fourth -- as the we will expect as order include little mentioned, sales Jim and bit billion. that XX, $X I aero, we F-XX. ramp-up including yes, a a and

certainly sales your to be answer question, will quarter. So the here that fourth part mix yes, in of the

Operator

go ahead. Next, to Please Seaport we’ll Rich go Safran with Research Partners.

Rich Safran

Greg, Jay, good are morning. Jim, you? How Maria,

Jim Taiclet

Good morning.

Rich Safran

I you a cash all get about And flow heard opening put Jim, the and the you bit even I’m little you year. your to added question. uncertainties hopefully, chain cash long-term and Because I think remarks So outlook spot on gave that. Jay, going I’ll year, supply And outlook long-term to a last here. a flow answer a on

you recognizing buybacks long-term morning you to could this long of And been us talking Do So, a visibility term cash not update? a have flow if in and per there’s here. free cash that cash share? confidence possible, you’ve give of flow and high lot enough terms

Jay Malave

$X.X our free deliver deliver I -- in billion XXXX. that cash was level reason flow last and think we year, off cash any bit can’t believe beyond going don’t I’m said and ‘XX ‘XX. so flow about Rich, ‘XX. and off to $X.X that we billion here, if in recall Well, see of continue it you little I why a free

in again, So management stop flow, going discipline share focus, management were Again, with saying ago. will our better year -- free our what just cash is cash and to on one year. we not capital, get a flow program our focus free the repurchase delivering than after working

flow And mid-single-digit growth year you’re that that in free again, to period per we committed a our so, ago. cash to continue our time. probably flow confident the looking I’m can share, deliver pretty range over this the And growth, of cash of we free

Greg Gardner

is this John, Greg. Hey

think up the come hour. of top to I we’ve the

call turn over that, to I’ll with Jim. the So back

Jim Taiclet

returns issues by, now. meet to conclude balance again, cash Jay to like sheet when years cycles, Recession up down these have I other today. and been our that around our through some so our share about, few attractive in XX on century American And commitment the got total customers much solutions along I’d of Thanks. way. by as as cash and completely challenges what right a long-term, Greg. and generation today reinforcing security and shareholders, facing And was of why are well that this per to company, we are the That’s to right happened at the you generation. metric -- Sure, robust flow that and the XXst us might strong free that’s for if Tower, underpinned and delivering too, Jay delivering global just talked it our emphasizing focused so Great I on reliable

in as said, amplify inflection go. per to growth the creation few next investing our anticipated value for ourselves years, positioning the customers’ way as share in we’re for the innovative we So, technologies missions, repurchases I and strong along

on concludes with look for all we John, in forward everybody. us again of joining our call. January. thanks you earnings and call today, speaking to So, that the Thanks, next

Operator

thank for and participation. you Ladies gentlemen, your

You may now disconnect.

Lockheed Martin (LMT) 18 Oct 222022 Q3 Earnings call transcript