Q3 2022 Lockheed Martin Corp Earnings Call

October 18, 2022

Okay.

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.

Thank you John and good morning.

I'd like to welcome everyone to our third quarter 2022 earnings Conference call. Joining me today on the call are Jim <unk>, Our chairman President and Chief Executive Officer, Jay Malave, Our Chief Financial Officer, and Maria Richard <unk>, Li our new Vice President of Investor Relations.

Statements made in today's call that are not historical fact are considered forward looking statements that are made pursuant to the safe Harbor provisions of Federal Securities Law.

Actual results may differ materially from those projected in the forward looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward looking statements.

We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non-GAAP measures that may be used in today's call.

Please access our website at Www Dot Lockheed Martin Dot Com and click on the Investor Relations link to view and follow the charts.

With that I'd like to turn the call over to Jim.

Thanks, Greg Good morning, everyone and thank you for joining us on our third quarter 2022 earnings call as we review our quarterly results, our 2022 full year outlook and our preliminary expectations for 2023.

But before we begin I'd like to welcome Maria well I'm excited to tell you all started as our new Vice President of Investor Relations just yesterday.

I'd also like to thank Greg who announced his plan to retire at the end of the year for his more than 37 years of dedicated service at Lockheed Martin, including five terrific years, as our vice President of Investor Relations. It's been a pleasure to work with you Gregg and we wish you all the best in retirement, Thank you Jim.

I'd also like to note that we continue to await the U S Army selection for its future long range assault aircraft competition flora as it is known will modernize the Army's rotorcraft fleet and represent a long term franchise growth opportunity. We are confident that defiant X is the transformational aircraft that the U S Army.

It's going to need to accomplish its complex missions today and well into the future and we look forward to the army's announcements.

Lockheed Martin had a solid quarter financially with 3% increase in sales from last year's third quarter and strong operating margins and earnings per share.

Our free cash flow was outstanding as we generated $2 7 billion in the quarter and our backlog grew nearly $5 billion closing at 140 billion.

We remain on track to achieve our full year outlook for all of our financial metrics that we discussed last quarter.

In a few minutes Jay will provide a detailed review of our quarterly results and updated 2022 guidance and trending information.

But before he does that I will provide a framework for our outlook.

And discuss our plans for delivering value to customers and shareholders over the next several years.

We continue to anticipate growth over the long term, but with the residual pandemic impacts and supply chain challenges continuing we now expect a return to growth in 2024 was 2023 sales being approximately equal to our 2022 outlook.

We are confident in our four pillars to drive growth in 2024 and beyond.

Accordingly, we expect to deliver solid growth in free cash flow per share in 2023, and thereafter through a combination of cost reductions throughout the business improve working capital management and an expanded share repurchase program.

Yes.

Our board of Directors has approved an increase to our share repurchase authorization to $14 billion.

You will see in Jay's charged that we're doubling our share repurchase plan outlook for this year.

Increasing our outlook by $4 billion for a total expectation of $8 billion in 2022.

We also announced a 7% dividend increase this quarter. So altogether, we are on track to deliver approximately $11 billion to shareholders in 2022.

We are also elevating our commitment to drive long term growth through strong independent research and development and capital expenditure funding with.

With an expected total of nearly $4 billion in 2023.

These investments will support our customers and deliver on our 20 <unk> century security vision to accelerate leading edge commercial digital technologies in defense of our nation and allies.

A key driver of this strategy as our new one <unk> transformation.

Or as we call. It one LMS a multibillion dollar seven year company wide program to transform our end to end business processes and systems.

One <unk> will create a model based enterprise with a fully integrated digital thread throughout the design build and sustained product lifecycle.

And part is part of our ongoing corporate stewardship approach.

We are conducting an internal review to identify potential synergies between our four business areas further cost reduction opportunities and a general portfolio of review with the goal of increasing operating efficiency and anticipation of our future growth.

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

We will continue to actively reinvest capital into our business to meet our customers' requirements and drive organic growth and.

And we will use our disciplined and dynamic capital allocation process and strong balance sheet to drive attractive total returns to shareholders.

Moving on I'd like to highlight a few key accomplishments from each of our business areas beginning with an update on our F 35 program.

Last month, the Swiss government signed a letter of offer and acceptance for the procurement of 36 F 35 days.

This milestone completes the government to government procurement process that was first announced in June 2021, when the Swiss Federal Council Sharon its selection of the F 35 for its future fighter.

The signing officially makes Switzerland, the 15th F 35 customer.

Also in August we received contractual authorization from the joint program office.

Enabling us to book a lot 15 order of over $7 $5 billion in recognized revenues and earnings from the second quarter as well as from the third quarter.

Our space team celebrated the successful launch and deployment of the space based infrared system Geos <unk> satellite.

Final spacecraft and the <unk> constellation.

<unk> has been one of our longest running signature programs, providing the space for us with an integrated system for missile warning.

That'll space awareness and intelligence gathering.

We will also continue to support and advance this important mission through our next generation overhead persistent infrared or next Gen IR.

IR program.

Which will deliver even more advanced and more survivable missile warning capabilities to the country.

Yes.

At Rotary and mission systems, the Sikorsky line of business secured an order for 12 seahawk helicopters from the Australian Ministry of Defense.

Over the past 40 years, we've delivered over a thousand Seahawks.

The U S and international customers both.

With more than 50 remaining in backlog.

And in missiles and fire control the state Department approved the potential sale to the United Arab Emirates for two <unk> systems, including 96 interceptors.

The UAE currently operates two that batteries and this opportunity with significantly increased their air and missile defense capabilities and once finalized could be worth over $2 2 billion.

Turning to budgets, both chambers of Congress have advanced appropriation bills in support of fiscal year 2023 Department of defense budgets.

We have seen strong bipartisan support for increased defense funding and congressional authorization and appropriation committees.

Final legislation approving these funds has yet to be passed.

And the federal government is currently operating under a short term continuing resolution for FY 'twenty three.

Limiting the Dod funding to prior FY 2022 levels.

As part of the continuing resolution Congress did approve additional supplemental spending to support efforts in Ukraine for the defense of their country.

<unk> added $3 billion in funding for Ukraine security assistance initiatives, a program to provide equipment weapons and military support to Ukraine, bringing.

Bringing the total amount appropriated for this effort to $9 billion.

<unk>.

In addition, the continuing resolution appropriated $2 billion to replenish U S stocks of equipment sent to Ukraine and to increase production of critical munitions.

With the presidential drawdown authority funding now having been increased to over $14 billion since the beginning of the year.

The International community has also increased their focus on global security with nations across the World, having announced the planned five year increase in defense budget funding of approximately $60 billion in total.

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

While many of these contracting actions remain in the early stages and May take time to be fully implemented we believe our signature programs and 20 <unk> century security technologies have us well positioned to address the challenges presented by a resurgence in global great power competition.

Turning to our 20 <unk> century security strategy I'd like to highlight two examples of Lockheed Martin's leadership into turns technologies and how our <unk> Dot mill open architecture can be used to enhance performance and drive effective joint all domain operations.

During the third quarter at Lockheed Martin and AT&T team to transfer Uhm 60.

Black Hawk helicopter flight and performance data from an aircraft flying in Connecticut to receiving location in Colorado, using both an AT&T <unk> private cellular network and Lockheed Martin's <unk> Dot mill multi site pilot network.

Operational performance was also improved with the efficiencies introduced by this technology shortening the total processing time of the task by nearly 85%.

Also this quarter, Lockheed Martin and horizon fluid <unk> enabled drones to capture and securely transfer of high speed real time intelligence surveillance and reconnaissance data from aircraft and flight to Geo locate stimulated adversarial positions.

This demonstration showed the capabilities of our hybrid base station to bridge commercial and military technologies together, providing our service members with enhanced deterrent capabilities and further enabling the mission all the way out to the actual battlefield.

With that I will turn the call over to Jay and join you later to answer your questions.

Thanks, Jim and good morning, everyone.

Today I will walk you through our consolidated results business area detail provide an update to our 2022 outlook as well as offer some thoughts on 2023 and beyond.

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

Let's begin with chart, three and an overview of our consolidated third quarter financials Lockheed.

Lockheed Martin delivered solid results for the quarter to start we generated sequential sales growth of 7% to $16 6 billion as anticipated.

Segment segment operating profit was $1 9 billion.

At 11, 2% margin.

With earnings per share of $6 71.

Reflecting solid underlying performance that absorbed 16 of mark to market headwinds.

We also increased backlog with a one three book to Bill ratio.

Driven by the F 35 production lot 15 contract action.

Free cash flow was strong in the quarter at $2 7 billion.

Further, enabling the execution of our disciplined and dynamic cash deployment strategy and returning over $2 billion through share repurchases and dividends.

Turning to consolidated sales and segment operating profit results on chart four.

Total sales increased 3% from the third quarter of 2021 with growth in three of our four business areas.

Segment operating profit was up slightly as the benefits from higher volume and equity earnings more than offset lower step ups than last year.

Moving to earnings per share on chart five.

On a reported basis earnings per share were higher by $4 50.

Adjusting for last year's pension transfer transaction and Mark to market accounting EPS grew 4%.

Primarily reflecting the benefits of higher operating profit and a lower share count.

All in all solid results that position us well to meet our full year commitments.

Moving to cash flow on chart, six we delivered our strongest quarter.

Our cash flow year to date.

With strong collections, driving $2 7 billion and free cash flow this quarter, while maintaining accelerated payments of $1 1 billion to suppliers.

Shareholder cash deployment continues to exceed free cash flow year to date with 121% of free cash flow deployed through dividends and share repurchases.

We have substantially completed our 4 billion dollar <unk>.

A $4 billion 2022 buyback target as we announced this quarter. We also increased our dividend, 7% now paying an annualized dividend of $12 per share.

Moving to segment results and starting with Aeronautics on chart seven third quarter sales increased 8% year over year.

Driven by higher F 35 production volume, including the recognition of $325 million of sales that were deferred from the second quarter associated with the last 15 contract action.

Increased volume in our classified programs at Skunk works also contributed to the growth.

Operating profit increased 6% primarily following the.

Sales volume increases on a 35, partially offset.

By lower margins on classified programs.

Moving to missiles and fire control on page eight.

Sales increased 2% driven primarily by increased volume on Pac three interceptors SYGMA.

Segment operating profit was down 8% as lower favorable profit adjustments this quarter more than offset the benefit from higher volume.

At Rotary and mission systems on page nine.

Sales decreased year over year by 5%.

Driven primarily by lower Black Hawk production volume at Sikorsky.

Operating profit decreased 10% Boeing Sikorsky production volume and lower favorable profit adjustments this quarter on the Blackhawk program.

Turning to chart 10, and our space business area.

Sales were up 7% driven primarily by the continued ramp of our next generation Interceptor program.

Operating profit increased 14% following the volume increase along with higher equity earnings from United Launch Alliance.

Okay moving to our updated outlook for 2022 on page 11.

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

With the announcement this morning of the $14 billion repurchase authorization approved by our board of directors, we've increased our forecast for share buybacks to approximately $8 billion for the year.

An increase of $4 billion from our prior expectation, reflecting our confidence in the long term growth outlook and amplifying per share value creation.

We expect the EPS benefit from our incremental planned buybacks this year to be offset by the third quarter Mark to market headwinds and therefore are holding our current EPS guide of $21 55 for the year.

Also while our consolidated outlook did not change we did have some puts and takes between the business areas and you could find that detail in our backup charts.

On chart 12, we've laid out our preliminary framework of expectations for 2023.

As we've discussed before we remain confident of sustained growth driven by four pillars.

Those are programs of record.

Classified programs.

Hypersonic and New awards.

This is supported by the higher backlog through the third quarter and further growth expected by year end.

We do anticipate flattish sales in 2023, however, primarily due to delayed sales conversion and our programs of record backlog as we expected recovery from Covid and supply chain shortages will be more gradual than previously expected.

And our classified businesses, we expect another year of growth in 2023.

This growth along with our contract mix headwinds will be accompanied by pressure of approximately 20% to 30 basis points and overall company segment operating margin all.

Compared to our 2022 outlook.

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

Importantly through management focus and aggressive working capital actions our expectations for 2023 free cash flow remain unchanged in spite of the topline and margin pressure.

Looking forward, we are confident in the companys prospects for growth and value creation.

With our aggressive share buyback plan, we anticipate repurchasing approximately 10% of our shares outstanding over the next several years several years and coupled with sustained free cash flow.

We expect to deliver outstanding long term value to shareholders.

Okay. So let's wrap up on chart 13.

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

We continue to invest in innovative solutions, including commercial technologies in support of our customers important missions and 20 <unk> century security.

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

Before we open up to Q&A I would also like to thank Greg Gardner for his 37 years of dedicated service and contributions to the company he.

He has been an outstanding partner and resource to all that he has supported.

We wish him well in the next phase of his life.

Wherever we will remain with us through the end of the year to transition Maria Richard <unk> Li <unk>.

Maria brings investor relations experience from multiple companies, including Etfs, where we both work together.

She is an excellent financial executive and thought partner and I am excited that she is joining the team with that John Let's open up the call for Q&A.

Certainly and ladies and gentlemen, if you wish to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the ones Euro command, if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question you May press, one then zero.

At this time and first of all line of Rob Stallard with vertical research. Please go ahead.

Thanks, So much good morning, good morning, Rob.

And also I would say all the best to Greg and welcome Maria.

Jim.

But in terms of the questions.

Okay on your outlook for 2023, I know you haven't given it a lot of detail here guidance for the coming next quarter, but you mentioned that classified is going to be going up but overall youre going to be flat.

Coming down next year, and what's causing that.

Yes, we have some some program transitions Robin maybe I'll just maybe go through around some of the business areas to give you a little bit of color there.

When you look at Aero next year, we expect that to probably be in the range of being down flat to down slightly.

That's on the back of lower production volume on the F 35.

We expect that to be down even though the sales or the deliveries will be generally flat.

We recorded sales in advance of that with long lead procurement in 2021 and 2022. So it will be a period of catch up on sales.

For Arrow there so that's going to be the biggest driver there that we'll expect that to abate when we go into 2024.

At MFC, we've got some just some timing some program timing, particularly in our sensors business, we expect them to be probably flattish to down slightly as well.

And then we expect some growth low single digit growth at both RMS and space.

RMS will just be driven.

By new programs in our space we have.

Our national Security business is down, but we've got other programs that are spiking up.

There and so that's generally what's driving it I would say by business area by segments, So slightly down in a few and slightly up in others and on balance will be flat.

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

Yes.

Good morning, guys. Thank.

Thanks for the question.

Jim can you walk through why you think growth is going to start again in 2024.

What underlies that and may be one of the things I scratch my head on a bunches.

Customers were up 35.

And it looks like may be some more.

Over the next year or so.

So how do we think about that growth recovery whats going to underlie that.

And why aren't F 35 levels at a higher rate of production of them, where they are today.

They go higher.

Sure Brian It's Jim here, so the two biggest pieces of our four pillars of growth.

Our programs of record and I'll speak to a few of those in a second in the classified business we have.

And both of those are going to ramp up from 2023 to 2024 Meaningly we feel.

And the biggest piece of all again the programs of record are going to come into three or four very identifiable areas. One is the F 35, sustainment right. So with more aircraft out flying theres going to be more of a.

Overhaul repair spare parts support those kinds of activities going on and Thats going to continue over a number of years. So F 35, Sustainment is a growth area.

MFC the Pac three is resurging, there's interest in.

Various parts of the world the Middle East Europe , and Asia now for Pac three so the capabilities of that.

Air Defense system are really going to be kicking into gear for the company in the next couple of years, including in 2024.

Along with that similarly, the CH 53, K is going to move up the production rates significantly and there is some additional international interest there.

That aircraft can.

Do lift capability that far exceeds any other that's ever been built the history.

And it's I think going to get even more uptake as time goes on.

In the fourth.

Many of the programs of record that will grow as fleet ballistic missile.

Then yesterday navies essentially going to revamp for the second time tried and fleet ballistic missiles.

System.

And Thats, a Lockheed Martin franchise will continue to grow again, starting in 2024 on.

On the classified side.

2023 years.

Is helpful, but not really the ramp that will come in 2024, so between programs of record and classifieds youre going to get the bulk of that growth.

On F 35.

The U S government has got to kind of determine what its budget priorities are.

The Mac at the macro level going forward one of those.

As Ben.

Nuclear deterrence and so between the bomber program the ground based missile.

Recapitalization and the fleet ballistic missile that I just mentioned there is going to be a significant amount of.

Defense budget proportionately spent on.

The nuclear.

Revitalization.

But also the conventional threats have gotten.

Worse instead of better.

We look forward into the next two or three or four years, and that's going to be a budget issue for the U S government.

We've recommended and I think the services would support a steady production rate of 156 aircrafts starting again in the 2020 timeframe. When we can get back up to that based on the Covid recovery for our supply chain.

And I think Thats supportable and it takes about 80 U S aircraft to.

To make that happen per year with another 75, or so coming from international we see the international demand and it's going to be up to the us government to try to support that 80 number.

Between the congressional.

Committee processes for authorization and appropriation along with the President's budgets going forward. So we hope for that we expect it because that's the need and that's where we think the F. 35 program is going to go but again.

In FY 'twenty three.

We won't have that full ramp up yet.

Let me just to maybe add a little bit to it as well right.

Just to augment some of the things that we're seeing in 2023, we've got some expected abating headwinds when we go into 2020 for Jim mentioned, a little bit on supply chain.

Primarily affected our programs of record and so those should lift by the time, we get to 2024. We also have a few program transitions in 2023 that will also allow for easier compares when we get into 2024 and so for example, I just mentioned the F 35, where production will be down next year those will normalize when we get into 2024.

Which will allow for sustainment to grow as Jim mentioned, we also see accelerated growth in F. 16 program as you may recall that program slipped to the right, but in 2024, we expect that to accelerate.

In space as Jim mentioned SPM through other programs such as <unk> that will continue to grow and so we've got some things where were cycling down on 2023 on the <unk> program and even things like Nextgen Geo or <unk> again, those headwinds will abate as we get into 2024. Similarly, MFC Jim mentioned, the <unk> III <unk>.

Graham will see also continued growth there in the classified programs as well and then at RMS as Jim mentioned also CH 53, K. There's also other radar programs as well as joint all domain type programs like defense of Guam that will drive some growth in those years. So although these all of these areas and these programs are the ones that we have pretty clear visibility to do assume obviously that.

Theres abatement to an improvement in supply chain, but that's 15 months from now for improvement that we expect to occur.

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

Yeah, Hi, Thanks for the question and Great Best of luck and good working with you.

I wanted to ask about future vertical lift Laura just what youre hearing from your customer there on the delays in <unk>.

Any indication of what's driving that and when do you think that that contract might be up.

Matt It's Jim the only thing we can say about the.

The schedule for Florida decision.

What the U S government puts out publicly so we don't have anything else to add to that.

It'll it's their schedule and time line and we think we've put in a terrific offer.

And also having been around some of these helicopter pilots and my Air Force time, absolutely scared the heck out of me a couple of times and I flew with them they want to be low they wanted to be maneuverable below the tree line.

And I have seen the.

Thus far in Florida fly they can do it there is a video you can look at on Youtube that shows you how amazing. This helicopter technology is and it also gets you up to like a $230 to 50 not forwards fee when you need it. So it gives the best of both worlds if youre in the rotorcraft business is a flyer.

You get good forward speed.

Faster than it's ever been for us traditionally design helicopter because of our counter rotating.

Rotors.

And it also gives you the maneuverability even better.

Then many of the traditional helicopters could have provided so we think it's the best solution for the actual frontline army or other service pilot.

It can be up to U S government.

See where they come out on that but the schedule is there is and we can't really comment on it.

Next we'll go to Pete Dubinsky with Alembic Global Advisors. Please go ahead.

Hey, good morning, guys.

Greg and John Gregg enjoy retirement.

Jim Jim had a question on missiles and fire control.

Like the last few years, you've had a production.

Production programs have been down, but you mentioned this resurgence in the Pac three and say it seemed like you guys were pretty positive on a range of production programs <unk> for instance, being one of them because of what we've seen the papers, but if we think about the midterm at missiles and fire control with this kind of resurgence in the production programs.

Is there a margin opportunity there now that you guys are seeing.

Whereas maybe the <unk>.

Production programs kind of start to shift back versus some of the hypersonic development projects.

So Pete I'd say, yes.

The legacy.

But still extremely effective MFC programs are fairly high margin because of the volume and the learning curve that were already down so that will be a margin upside to us should those volumes increase further.

We've gotten ahead of this so for high <unk>.

Gamblers javelin again, the products you kind of see in the.

In the news these days and a few others as well.

About six seven months ago, when we saw what was beginning to happen in eastern Europe .

I went over to visit some of the senior.

Officials in the Pentagon and <unk>.

Basically it took them a letter and said we're going to start spending on capacity for a few of these systems, including the ones that you just asked about.

And now we've got a lot done already so for example.

On <unk> specifically.

We've already got.

With our long lead supply chain to plan for increasing production of 96 of these units a year.

We advanced funded ahead of contracts $65 million to shorten the manufacturing lead time that was without a contract or any other even.

<unk> or whatnot back from the government. We just went ahead and did that because we expected it to happen. So those parts are already being manufactured now.

The third thing we did was we.

Determined where we could open up another modern manufacturing facility to be able to.

<unk> products and <unk>.

Got it ready early and we're cross training, our skilled workforce across a bunch of product line. So as the demand grows and shifts across some of these products over the next few years, we're going to have people that cannot be fungible you move between them.

Then the last thing we did was to going back to this <unk>.

We're putting the best and newest manufacturing technology.

And to some of these product lines first.

So that when the ramp comes we can pivot to it quicker. So those are some of the things that we've done to actually capture some of the volume we expect to get and we do expect to get it both from the U S.

To refill stocks as I mentioned earlier in the prepared remarks and also <unk>.

Significant interest being shown now its got to go ahead and get contracted which as we discussed last call can take couple of years to get all that done, especially for an Fms contract, but we know the demand is there and we've spoken to the senior government officials from those countries that that know that this is important for them.

Pete just to follow up on that.

We do expect some sales upside there on some of these programs that Jim mentioned that is likely to be in the probably the starting in the 2024 timeframe given the long cycle nature of where we are.

In spite of the fact that we've done some advanced funding. The only thing I would just have to also mentioned is that where we see the margin pressure next year a lot of that is driven at MFC and so while we will see a mixed benefit associated from these higher margin programs.

That is probably more in 2024 and beyond 2023, we'll see a step down from where they are this year in 2022 and the way to think about it is in the third quarter MFC did about $13 five whats implied in our guide for the fourth quarter as high <unk>, they're going to be in that mid <unk> range in that ballpark for <unk>.

23, given some of these new increases in the programs that we've invested in and so we'll see a little bit of pressure there across the company really.

Given by MFC.

But again, we will see some of those mixed benefits come back to us in 'twenty four and beyond.

Next we'll go to Sheila <unk> with Jefferies. Please go ahead.

Thank you Andrew.

Good luck, Greg Thank you and good morning, gentlemen.

<unk> I wanted to ask about the CRB price increase.

From a different umbrella can you talk about how youre thinking about the climate as a percentage of free cash flow going forward and what were some of that Samsung made around the R&D tax credit perhaps in that aspect.

Maybe.

Jason for that as you think about mark market multiples coming down on some of the smaller company meeting potentially prime.

Pair up with how do you think about taking advantage of that opportunity along with the share repurchase authorization.

Okay.

There's a lot there so let me maybe start with the share repurchase as I mentioned, both Jim and I mentioned in our prepared remarks, we're confident the long term outlook of the company. We saw this as an opportunity.

To really amplify the value creation that we see over the long term and we saw no better time than really now is to get started on that.

Here in the fourth quarter.

Profile.

To think about going forward is $4 billion here in the fourth quarter $4 billion in 2023 $4 billion in 2024, and maybe $2 billion in 2025 as a starting point and so that's the profile, we should expect it to be as.

As far as that we do are going to finance this fourth quarter.

Share repurchase program with the issuance of debt will be about $4 billion.

That will increase our interest expense next year, but again, its all accretive and so we'll see that again, our debt leverage ratio on an EBITDA basis will put us still below at or below one five times. So it's still a very.

Supportable and also very attractive as far as the R&D.

<unk> capitalization really nothing's changed at the moment, we will see what happens as we move forward here in the fourth quarter first things first we got to get through the November elections.

And then we had the expiration of the existing continuing resolution on December 16th it's possible through legislation. Therefore, new budget that we could see movement on tax extenders that would include some type of either deferral or what we would prefer a repeal of the task capitalization policy and as you know.

We believe that it sound policy and we believe there's bipartisan support to remove any disincentives that.

That promote innovation and so that's a firm policy that's something that we are firmly behind and will continue to push for.

Sheila when it comes to small and mid sized companies teaming up with Lockheed Martin.

We're set up for that I can describe three ways in which we are ready now.

Pair up and team up with whether they are commercial or defense industrial base companies of smaller scale.

One is that we've had for years LM ventures like literally a VC house inside of Lockheed Martin.

It's been funded $200 million level originally.

The investments that have been made under that authorization are now worth about $400 million. So even if we mark to market a little bit lower we had basically 100%.

Return on that initial investment.

Seeing the success when I joined the company of the <unk> Ventures program, a couple of years ago.

We want it had doubled the authorization. So we're looking where it is where to invest another $200 million.

<unk>.

Early stage companies.

The next level.

Hi.

Motivated the team in J help us create what we can now call Lockheed Martin evolve or <unk> EV <unk> and what that's meant to do is to go at a step higher and say how do we do joint ventures or commercial alliances with midsized companies co invest et cetera, whether there again there is the commercial.

Side or the.

The defense industrial base side or or space industry in ways that.

We can take that outside of our rate structure and manage it and fund it in a different more creative way, so, whereas the VC space with our ventures were in the mid sized stage space with <unk> evolve, which is just literally getting off the ground I'll say.

But we have the framework the structure and the ability to engage in that level.

The level of investment now and then thirdly, something we've done over the years is acquire.

Small and medium companies with technologies are critical supply chain components that are available. So we will continue to do that as well. So those are the three routes.

We have in place up and running Ellen ventures, Elam evolve in the acquisition process to bring those kind of capabilities into or affiliation with Lockheed Martin.

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

Hey, good morning, Good morning, Rob Best of luck, Greg or Jim I wanted to ask you a high level question, particularly because youre a pilot.

The Air Force is facing a shortage of pilots and the Navy is planning to have at least 60% of the carrier air wings on crude.

So given the Lockheed so strong unmanned aircraft I wanted to ask you about unmanned and the positioning there and how that fits into the long term plans of both the air Force and the Navy.

So Rob autonomy is one of the 2014 critical technologies that we think are essential in the 20 <unk> century.

And so everyone's credit at the company.

Been investing in Skunkworks in other parts of the company, including Sikorsky.

In autonomy for 15 plus years right. This is not an easy thing to do or an easy thing to get approved or regulated.

But.

Lockheed Martin Sikorsky when it was part of UTC and thereafter had been working on autonomy for quite some time.

So the.

The aeronautics side of it I can't say much about because it's pretty highly classified but where we're far down the road on crude on crude teaming and.

In the January call, we expect to have hit a couple of milestones in that that I'll be able to explain in some more detail, but we want to get the.

Get the testing done before we talk about it.

But we're far down the road there mainly out of Skunk works as I said.

And then on the rotorcraft side.

If you get the aviation week from maybe three or four months ago that showed a sikorsky helicopter flying around with no people in it right.

I've actually flown in the matrix helicopter, we call it which is a DARPA project that's run out of Sikorsky.

It has three.

And they all work by the way. It has three modes. One is manual mode. Just like any traditional helicopter. The second mode is as sort of assisted like a tesla so to speak right. So you can take over if you need to or if you want to change the flight instantly and then the third modus fully automated and.

You plug the mission in.

In a trailer down a bit Stratford, Connecticut.

This thing will take off go do their mission and come back and land on it itself. So it's really working already and then it's a matter of when.

As the U S government and the services ready to turn these technologies into programs of record, but we'll be ready when they are.

Our next question is from Cai von <unk> with Cowen. Please go ahead.

Yes.

Yes, let me join everybody and say, thank you Greg for great job done and Maria welcome.

<unk>.

We haven't talked about inflation.

What are you guys seeing and assuming an inflation going forward and as you know Bill a plant is basically suggested the Doj.

Should kind of kick in to help companies.

The current level of inflation was not anticipated where the contract when the contracts were signed.

Senator Elizabeth Warren No big surprises.

That's not a good idea. So what are you seeing in inflation and what are you assuming going forward in terms of support.

Sure.

Inflation is two fold one on our own labor front, and what we see in the supply chain.

For our portfolio of business is a fair amount of our business somewhat insulated.

Because it's not fixed price and so some of the cost plus benefits that we get on.

That risk is not is not does not held at Lockheed Martin for the 60% of our business that is fixed price a lot of our just contracting policies and actions and implementations revolve around going back to back with our supply chain, meaning that whatever duration of time that we commit in our contract with our customer we have the St.

To our supply chain to us over that same period of time and so in many of those cases, we don't bear that risk either.

But it does come into factor as we're going into new bids and proposals with our customer we are seeing.

Different changes both on a labor side and in supply chain and that has does have an impact really going forward on bid and proposal is something that we have to keep in front of us and we're having dialogues with the customer as you mentioned theres been a little bit of a shift in policy the Dod as far as.

Acceptance of.

Economic price adjustments and Thats something that we do continue to have dialogue with our customers on.

And the existing contracts and it's subject to funding availability, which has been somewhat difficult to actually obtain but I think going forward. That's something that certainly will be part of our negotiations and part of our contracting.

As far as labor is concerned we have increased our assumptions and our existing backlog contracts.

Been able to absorb that through productivity and other management reserve type of action. So we've not really seen much of an impact there, but it's certainly a watch item as we go forward.

Next we'll go to Seth <unk> with Jpmorgan. Please go ahead.

Hey, Thanks, very much good morning, everyone.

Echo everyone's best to Craig and enter Maria.

I'm going to try and sneak two in here real quick just on Jay The Wall Street Journal This morning, saying that growth in 2024.

Should be low single digits is that is that right is that how we should think about it.

And then the second one I wonder if you could help us with the pension outlook for next year.

Both <unk> and caz.

And then just thinking about the cash outlook beyond 2024, and how that remaining balance kind of.

Trails off in the coming years.

Sure Seth, Yes, I think low single digit for 2024 as a baseline is the way you should look at it.

We talked on this call today that there are some upside opportunities to that baseline.

Missiles and fire control is certainly a prime opportunity Jim talked about opportunities related to <unk> and other programs and so there could be upside from where we are today.

These are ongoing dialogues, we're having with our Dod customers. So it's hard to really put them into a firm forecast until we get ourselves clear picture in terms of what's going to be under contract and the timing of those deliveries. So I would say low single digit.

Baseline is the appropriate level to be.

We're getting better clarity and I think we'll have a lot more clarity come January .

Provide our full guidance for 2023 at a better outlook on 2024.

As far as pensions.

No.

Involved.

We do expect a Fas income to come down Youre talking in the range of say $50 million.

On the cost side, we expect the cost cost to come down as well by.

By about $75 million, so the SaaS kind of adjustment all in we're expecting to come down by about $125 million Thats. If we struck things today as you know at the end of the year, we will have to true up and formally change, but thats based on what we see today.

As far as cash.

But we're going to have to get back to you in 'twenty, four and beyond and that Greg will have to come back to you Seth on that.

Our next question is from Cristina <unk> with Morgan Stanley . Please go ahead.

Hey, good morning, everyone and Greg Congratulations and welcome Maria.

Jim and J I'll. Thank you for providing color on the specific headwinds in 2023, but maybe taking a step back for a 30000 foot view the defense budget environment is pretty robust we saw the 22 budget request up mid single digits.

Military aid so far adds another 10% to the 22 modernization budget. So your book to Bill also year to date is one one times I guess I would've thought that these items could have offset the specific 2023 headwinds you've called out so maybe absent the specific programs you mentioned should we expect.

Folio to grow above below or in line with the overall Dod budget.

So Christine good morning.

I would say first of all that.

The defense budget is expected to go above and beyond what the President's original submission was a few months back in 2023 right.

Now, even if that happens and we do expect it to happen and I would just point out a couple of.

Programs that probably would benefit from that.

<unk> C 130 in that.

F 35 production, but it hasnt happened yet so we're not putting it into our forecast and let me just take a minute to step back and really reemphasize, what Jay said and that we don't have enough real information right now.

Early in the fourth quarter of the year to even give much more than our estimate of what the trend will be next year. So sorry.

Starting in 2024, we're going to start doing January guidance Thats formal we're not going to do anything ahead of that and I'll tell you the three issues.

Learned in my couple of years and management here. We just don't have clarity on one is the defense budget, which you've just raised a minute ago, we don't know what its going to be.

In January we will know what the defense budget is going to be and then along with that what's the status of the major orders and contracts that get put into that budget. Because as you are again pointing out whats the mix of the budget increase going to be as far as what the contracts and orders come from that and then finally, we don't necessarily have.

Status of what the supply chain health is going to be and even in 2023, yet because if there is another COVID-19 spike in the winter like there was last time.

Going to have effects in our supply chain. So there is those three issues really makes it I think almost.

Impossible to give you really high confidence trending information, which has been a tradition at the company when the defense budget was rising 5% to 10% a year.

But that's not in there was no COVID-19 by the way, but that's not the situation now so.

We're going to start next cycle.

<unk> tried to give you a trend line in October we'll give you is solid the formal guidance as we can in June of 2024 because of all of this.

Having said that even on the products that we fully anticipate are going to get increases because there have been actions inside of government to make it happen.

I used the analogy last call of the clutch wasn't engage yet on even on the order process and paperwork that needs to come to us. So we can actually start production.

The way I'd characterize it now is that the clutches engaging but into some lower gears.

Initially right. So the process has started.

I really give Dr. Lu plant now Theres, a lot of credit Andrew Hunter and the Air Force et cetera, The secretary of the Air Force Navy and.

Army departments are all engaged in making this happen.

It does take time to get through especially on international Fms contracts in commercial sales too. So for all those reasons Kristine, it's really hard for us to estimate what at this point in the cycle what programs are really going to benefit, but I'm pretty sure that F 35, and C 130 would be in there.

Many of the MSC products, we've already talked about.

Black Hawk demand internationally.

Especially as ginning up and as well as F. 16, So I think theres a lot of significant areas, where the company can benefit with an additional defense budget.

Kris.

One thing to remember in terms of 2023.

Despite of a lower outlook from sales perspective, even the margin pressure, we are still delivering the same amount of free cash flow that we told you a year ago and our free cash flow per share outlook has gotten better because of our share repurchase program.

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

Yeah.

Yes.

Good morning, everyone. Good morning, Tim.

Tim can you can you hear me, yes, we can good morning, Greg and congratulations Greg I appreciate all your all your effort.

Hey, Jay just maybe you made Jim made a comment about the aeronautics kind of flat.

To kind of slightly down in 'twenty, three but then sustainment becomes a bigger piece of the story as we get into 'twenty for sure.

Should we be thinking about aeronautics kind of dropping out in 2023 is that is that kind of what you're implying or there are other puts and takes that we should be thinking about longer term. Thanks.

I think so I think next year theyre dealing with some of the transition related to the changes in delivery profiles on the F 35 production contract.

And again, we're just catching up to some inventory because of some of the delivery profile has moved around.

Once that abates that headwind, we're going to see at least a leveling off on the production side, which will lead the growth for Sustainment and growth in classified programs and growth on the F 16 program and so I would expect them in 'twenty four and beyond to have a nice growth trajectory.

Yes, and I'd also.

There Peter that we're starting to get some real traction on our <unk> offerings, so to speak and one of them has been mentioned briefly today I'll call it defensive Guam and Thats the.

Really first.

Well highly organized D O D.

Major contract to come out that really drives the capability and not just a product or system and what it's meant to do is integrate and this is our whole <unk> dot middle approach actually that's why we wanted I think.

Is that integrating current command and control systems in use by the various services. So the army's happens to be provided by Northrop Grumman for example, we're going to fully incorporate that into the solution and work with them to do it.

And then we're going to bring the aegis system from Lockheed Martin into that mix and a number of other programs and products from a range of Oems who are going to work together on this for the first time.

In this way so I think this is going to be a real pathfinder for the future.

And once this demonstrates that it can be a success in the industry has got to coalesce and help make it happen with us.

We as an industry, we will see more of these opportunities.

24, plus timeframe too.

Our next question is from George Shapiro with Shapiro Research. Please go ahead.

Yes, good morning.

A couple of questions on the.

Aeronautics area.

<unk> was supposed to get in queue for Jay does that come with some added sales that you may be working on now as well and then a second question. If you look at the incremental margin on the property. It provided on the F 35, and the $325 million of sales.

21% does that imply that you increased the margin on the F 35.

Program and will that help the margin next next year or is it more than offset by the growth in.

Sustainment.

Second question, George we did have a profit adjustment on the F 35 program and the production program. There. So we will see.

Moving forward a higher recurring margin rate there is.

As far as Q4 and lots <unk>, yes, we do expect that order in the fourth quarter as Jim mentioned.

But over $8 billion.

We do expect a ramp up in sales at arrow, including F 35, and that will include F. 16, So to answer your question, yes, Sir.

<unk> be part of the sales mix here in the fourth quarter.

Next we'll go to rich Safran with Seaport Research partners. Please go ahead.

Jim Jay Greg Maria Good morning, how are you.

Good morning Rich.

So.

Tim.

Your opening remarks about uncertainties on the supply chain and all that.

And Jay going to push you a little bit on the spot here and hopefully get you to answer or a long term cash flow outlook question, because I think last year, you gave a long term cash flow outlook and even added a year.

So you've been talking long term this morning, and recognizing you know theres not a lot of high confidence here do you have enough visibility to give us a long term cash flow update and if possible could you catch that in terms of buybacks and free cash flow per share.

Well.

Rich. So if you think about our free cash flow last year, and im going off a little bit off recall here, we said $6 1 billion in 'twenty three I believe was $6 2 billion in 2024.

Don't see any reason why we can't deliver that and continue to deliver that level of free cash flow beyond 'twenty three 'twenty four so in our free cash flow again with the share repurchase program will get better than what we were saying a year ago again.

Our management focus on working capital and management focus discipline and delivering free cash flow, obviously, not going to stop after one year and so I'm pretty confident that.

We can continue to deliver the free cash flow that we committed to a year ago and again, our free cash flow per share our growth Youre looking probably in the range of mid single digit growth over this period of time.

Okay.

Hey, John This is Greg I think we've come up to the top of the hour so with that I'll turn the call back over to Jim.

Sure Greg Thanks, I'd like to conclude today by again, reinforcing what Jay just talked about our commitment to delivering long term attractive and reliable total returns to shareholders.

Underpinned by our strong cash generation and a robust balance sheet as well as delivering on these 20 <unk> century solutions to meet the challenges that our customers are facing and global security right now.

And if some of you might have.

Been around when I was at American Tower, we focus.

Completely on free cash flow per share generation and that got us through 18 years of up and down cycles of the great recession and a few other issues that happen along the way that's the right metric for this company too and that's why Jay and I are so.

Emphasis is so much emphasizing it today, so we're positioning ourselves for anticipated growth inflection in the next few years investing in innovative technologies for our customers missions as I said and strong repurchases along the way to amplify.

The per share value creation as we go so thanks again for joining us today and we look forward to speaking with all of you on our next earnings call in January .

John that concludes the call thanks, everybody.

Ladies and.

Gentlemen, thank you for your participation you may now disconnect.

We're sorry your conferences ending now please hang up.

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Thank you John and good morning.

Welcome everyone to our third quarter 2022 earnings Conference call. Joining me today on the call are Jim <unk>, Our chairman President and Chief Executive Officer, Jay Malave, Our Chief Financial Officer, and Maria Richard <unk>, Li our new Vice President of Investor Relations.

Statements made in today's call that are not historical fact are considered forward looking statements that are made pursuant to the safe Harbor provisions of Federal Securities Law actual results may differ materially from those projected in the forward looking statements. Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially.

He really from those in the forward looking statements.

Please access our website at Www Dot Lockheed Martin Dot Com and click on the Investor Relations link to view and follow the charts.

With that I'd like to turn the call over to Jim.

But before we begin I would like to welcome Maria well I'm excited to tell you all started as our new Vice President of Investor Relations just yesterday.

Been a pleasure to work with you Gregg and we wish you all the best in retirement, Thank you Jim.

I'd also like to note that we continue to await the U S Army selection for future long range assault aircraft competition flora as it is now.

We will modernize the army is rotorcraft fleet and represent a long term franchise growth opportunity. We are confident that defiant X is the transformational aircraft that the U S. Army is going to need to accomplish its complex missions today and well into the future and we look forward to the army's announcements.

Lockheed Martin had a solid quarter financially with 3% increase in sales from last year's third quarter and strong operating margins and earnings per share are.

Our free cash flow was outstanding as we generated $2 $7 billion in the quarter and our backlog grew nearly $5 billion closing at 140 billion.

We remain on track to achieve the full year outlook for all of our financial metrics that we discussed last quarter.

In a few minutes Jay will provide a detailed review of our quarterly results updated 2022 guidance and trending information.

But before he does that I will provide a framework for our outlook.

And discuss our plans for delivering value to customers and shareholders over the next several years.

We continue.

To anticipate growth over the long term.

The residual pandemic impacts and supply chain challenges continuing we now expect to return to growth in 2024 was 2023 sales being approximately equal to our 2022 outlook.

We are confident in our four pillars to drive growth in 2024 and beyond importantly, we expect to deliver solid growth in free cash flow per share in 2023, and thereafter through a combination of cost reductions throughout the business improved working capital management and an expanded.

Share repurchase program.

Sure.

Our board of Directors has approved an increase to our share repurchase authorization to $14 billion.

You will see in Jay's charts that we're doubling our share repurchase plan outlook for this year.

Increasing our outlook by $4 billion for a total expectation of $8 billion in 2022.

We also announced a 7% dividend increase this quarter. So altogether, we are on track to deliver approximately $11 billion to shareholders in 2022.

We are also elevating our commitment to drive long term growth through strong independent research and development and capital expenditure funding.

The expected total of nearly $4 billion in 2023.

These investments will support our customers and deliver on our 20 <unk> century security vision to accelerate leading edge commercial digital technologies in defense of our nation and allies.

A key driver of this strategy is our new one <unk> transformation.

Or as we call. It one LMS a multibillion dollar seven year company wide program to transform our end to end business processes and systems.

<unk> will create a model based enterprise with a fully integrated digital thread throughout the design build and sustained product lifecycle.

And part is part of our ongoing corporate stewardship approach.

We are conducting an internal review to identify potential synergies between our four business areas further cost reduction opportunities and a general portfolio review with the goal of increasing operating efficiency and anticipation of our future growth.

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

We will continue to actively reinvest capital into our business to meet our customers' requirements and drive organic growth.

And we will use our disciplined and dynamic capital allocation process and strong balance sheet to drive attractive total returns for shareholders.

Moving on I'd like to highlight a few key accomplishments from each of our business areas beginning with an update on our F 35 program.

Last month, the Swiss government signed a letter of offer and acceptance for the procurement of 36 F 35 days.

This milestone completes the government to government procurement process that was first announced in June 2021, when the Swiss Federal Council Sharon its selection of the F 35 towards future fighter.

The signing officially makes Switzerland, the 15th F 35 customer.

Also in August we received contractual authorization from the joint program office.

Enabling us to book a lot 15 order of over $7 $5 billion in recognized revenues and earnings from the second quarter as well as from the third quarter.

Our space team celebrated the successful launch and deployment of the space based infrared system Geos <unk> satellite.

The final spacecraft and the <unk> constellation.

<unk> has been one of our longest running signature programs, providing the space for us with an integrated system for missile warning.

That'll space awareness and intelligence gathering.

We will also continue to support and advance this important mission through our next generation overhead persistent infrared or nexgen.

IR program, which will deliver even more advanced and more survivable missile warning capabilities to the country.

Yes.

At Rotary and mission systems, the Sikorsky line of business secured an order for 12 seahawk helicopters from the Australian Ministry of Defense.

Over the past 40 years, we've delivered over a thousand Seahawks.

The U S and international customers both.

With more than 50 remaining in backlog.

And in missile and fire control the state Department approved the potential sale to the United Arab Emirates, <unk> systems, including 96 interceptors.

The UAE currently operates two sat batteries and this opportunity with significantly increased their air and missile defense capabilities and once finalized could be worth over $2 2 billion.

Turning to budgets, both chambers of Congress have advanced appropriation bills in support of fiscal year 2023 Department of defense budgets.

We have seen strong bipartisan support for increased defense funding and congressional authorization and appropriation committees.

Final legislation approving these funds has yet to be passed.

And the federal government is currently operating under a short term continuing resolution through FY 'twenty three.

Limiting the Dod funding took prior FY 2022 levels.

As part of the continuing resolution Congress did approach additional supplemental spending to support efforts in Ukraine for the defense of their country.

<unk> added $3 billion in funding for Ukraine security assistance initiatives, a program to provide equipment weapons and military support to Ukraine, bringing.

Bringing the total amount appropriated for this effort to $9 billion.

Yes.

In addition, the continuing resolution appropriated $2 billion to replenish U S stocks of equipment sent to Ukraine and to increase production of critical munitions.

With the presidential drawdown authority funding now having been increased to over $14 billion since the beginning of the year.

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

Sure.

Turning to our 20 <unk> century security strategy I'd like to highlight two examples of Lockheed Martin's leadership, and deterrence technologies and how our <unk> Dot mill open architecture can be used to enhance performance and drive effective joint all domain operations.

During the third quarter at Lockheed Martin and AT&T team to transfer you age 60, and Black Hawk helicopter flight and performance data from an aircraft are flying in Connecticut to receiving location in Colorado, using both an AT&T <unk> private cellular network and <unk>.

Keith Martin is <unk> Dot mill multi site pilot network.

Operational performance was also improved with the efficiencies introduced by this technology shortening the total processing time of the task by nearly 85%.

Also this quarter, Lockheed Martin and horizon fluid <unk> enabled drones to capture and securely transfer a high speed real time intelligence surveillance and reconnaissance data from aircraft in flight.

Locate simulated adversarial positions.

With that I will turn the call over to Jay and join you later to answer your questions.

Thanks, Jim and good morning, everyone.

Today I will walk you through our consolidated results business area detail provide an update to our 2022 outlook as well as offer some thoughts on 2023 and beyond.

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

Let's begin with chart, three and an overview of our consolidated third quarter financials Lockheed.

Lockheed Martin delivered solid results for the quarter to start we generated sequential sales growth of 7% to $16 6 billion as anticipated.

Segment segment operating profit was $1 9 billion.

At 11, 2% margin.

The earnings per share of $6 71.

Reflecting solid underlying performance that absorbed 16 of mark to market headwinds.

We also increased backlog with a one three book to Bill ratio.

Driven by the F 35 production lot 15 contract action.

Free cash flow was strong in the quarter at $2 7 billion further enabling the execution of our disciplined and dynamic cash deployment strategy and returning over $2 billion through share.

Purchases and dividends.

Turning to consolidated sales and segment operating profit results on chart four.

Total sales increased 3% from the third quarter of 2021 with growth in three of our four business areas.

Segment operating profit was up slightly as the benefits from higher volume and equity earnings more than offset lower step ups than last year.

Moving to earnings per share on chart five.

On a reported basis earnings per share were higher by $4 50.

Adjusting for last year's pension transfer transaction and Mark to market accounting EPS grew 4%.

Primarily reflecting the benefits of higher operating profit and a lower share count.

All in all solid results that position us well to meet our full year commitments.

Moving to cash flow on chart, six we delivered our strongest quarter.

Our class flow year to date.

With strong collections, driving $2 7 billion and free cash flow this quarter, while maintaining accelerated payments of $1 1 billion to suppliers.

Shareholder cash deployment continues to exceed free cash flow year to date with 121% of free cash flow deployed through dividends and share repurchases.

We have substantially completed our $4 billion.

Original $4 billion 2022 buyback target as we announced this quarter. We also increased our dividend, 7% now paying an annualized dividend of $12 per share.

Moving to segment results and starting with Aeronautics on chart seven third quarter sales increased 8% year over year.

Driven by higher F 35 production volume, including the recognition of $325 million of sales that were deferred from the second quarter associated with the lot 15 contract option.

Increased volume and our classified programs at Skunk works also contributed to the growth.

Operating profit increased 6%, primarily following the sales volume increases on a 35% partially offset by.

By lower margins on classified programs.

Moving to missiles and fire control on page eight.

Sales increased 2% driven primarily by increased volume on pad III interceptors.

Segment operating profit was down 8% as lower favorable profit adjustments this quarter more than offset the benefit from higher volume.

At Rotary and mission systems on page nine.

Sales decreased year over year by 5%.

Driven primarily by lower Black Hawk production volume at Sikorsky.

Operating profit decreased 10% following Sikorsky production volume and lower favorable profit adjustments this quarter on the Blackhawk program.

Turning to chart 10, and our space business area.

Sales were up 7% driven primarily by the continued ramp of our next generation Interceptor program.

Operating profit increased 14% following the volume increase along with higher equity earnings from United Launch Alliance.

Okay moving to our updated outlook for 2022 on page 11.

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

An increase of $4 billion from our prior expectation, reflecting our confidence in the long term growth outlook and amplifying per share value creation.

Also while our consolidated outlook did not change we did have some puts and takes between the business areas and you could find that detail in our backup charts.

On chart 12, we've laid out our preliminary framework of expectations for 2023.

As we've discussed before we remain confident of sustained growth driven by four pillars.

Those are programs of record.

Classified programs.

Hypersonic and New awards.

This is supported by the higher backlog through the third quarter and further growth expected by year end.

We do anticipate flat flattish sales in 2023, however, primarily due to delayed sales conversion and our programs of record backlog as we expected recovery from Covid and supply chain shortages will be more gradual than previously expected.

And our classified businesses, we expect another year of growth in 2023.

This growth along with our contract mix headwinds will be accompanied by pressure of approximately 20% to 30 basis points and overall company segment operating margin all.

Compared to our 2022 outlook.

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

Importantly through management focus and aggressive working capital actions our expectations for 2023 free cash flow remain unchanged in spite of the topline and margin pressure.

Looking forward, we are confident in the companys prospects for growth and value creation.

With our aggressive share buyback plan, we anticipate repurchasing approximately 10% of our shares outstanding over the next several years several years and coupled with sustained free cash flow.

We expect to deliver outstanding long term value to shareholders.

Okay. So let's wrap up on chart 13.

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

We continue to invest in innovative solutions, including commercial technologies in support of our customers important missions in 20 <unk> century security.

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

Before we open up to Q&A I would also like to thank Greg Gardner for his 37 years of dedicated service and contributions to the company he.

He has been an outstanding partner and resource to all that he has supported.

We wish him well in the next phase of his life.

Wherever we.

He will remain with us through the end of the year to transition Maria Richard <unk> Li.

Maria brings investor relations experience from multiple companies, including Etfs, where we both work together.

She is an excellent financial executive and thought partner and I am excited that she is joining the team with that John Let's open up the call for Q&A.

At this time and first of all the line of Rob Stallard with vertical research. Please go ahead.

Thanks, so much good morning.

Rob.

And also I would say all the best to Greg and welcome Maria.

Jim.

In terms of questions.

Okay on your outlook for 2023, I know you haven't given it a lot of detail here guidance for the coming next quarter, but you mentioned that classified its going to be going up but overall youre going to be flat.

Coming down next year whats, causing that.

Yes, we have some some program transitions Robin maybe I'll just maybe go through around some of the business areas to give you a little bit of color there.

When you look at Aero next year, we expect that to probably be in the range of being down flat to down slightly.

That's on the back really lower production volume on the F 35.

We expect that to be down even though the sales or the deliveries will be generally flat.

We recorded sales in advance of that with long lead procurement in 2021 and 2022, so it'll be a period of catch up on sales.

For Arrow there so that's going to be the biggest driver there that we'll expect that to abate when we go into 2024.

NMFC, we've got some just some timings of program timing, particularly in our sensors business, we expect them to be probably flattish to down slightly as well.

And then we expect some growth low single digit growth in both RMS and space.

RMS will just be driven.

By new programs and its space we have.

Natural security business is down, but we've got other programs that are spiking up.

There and so that's generally what's driving it I would say by business area by segment, so slightly down in a few and slightly up in others and our balance will be flat.

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

Hey, good morning, guys. Thank you.

For the question.

Jim can you can you walk through why you think growth is going to start again in 2024.

Underlies that.

And maybe one of the things I scratched my head on a bunches.

Customers were up 35.

And it looks like may be some more.

Within the next year or so.

So how do we think about that growth recovery whats going to underlie that.

F 35 levels at a higher rate of production of them, where they are today and could they go higher.

Sure Brian It's Jim here, so the two biggest pieces of our four pillars of growth.

Our programs of record and I'll speak to a few of those in a second in the classified business we have.

And both of those are going to ramp up from 2023 to 2024 Meaningly we feel.

Overhaul repair spare parts support those kinds of activities going on and Thats going to continue over a number of years. So F 35, Sustainment is a growth area.

MFC the Pac three is resurging, there's interest in.

Various parts of the world the Middle East Europe , and Asia now for tax rate so the capabilities of that.

Air Defense system are really going to be.

Kicking into gear for the company in the next couple of years, including in 2024.

Along with that similarly, the CH 53, K is going to move up the production rates significantly and there is some additional international interest there.

That aircraft can.

Do lift capability that far exceeds any other that's ever been built the history.

And it's I think going to get even more uptake as time goes on.

And our fourth.

Many of the programs of record that will grow as fleet ballistic missile.

That then yesterday navies essentially going to revamp for the second time, the tried and fleet ballistic missiles.

System.

And Thats, a Lockheed Martin franchise that will continue to grow again, starting in 2024.

On the classified side.

2023 years.

Is helpful, but not really the ramp that will come in 2024, so between programs of record and classifieds youre going to get the bulk of that growth.

On F 35.

The U S government has got.

Kind of determined what its budget priorities are.

The Mac at the macro level going forward one of those.

As Ben.

Nuclear deterrent.

So between the bomber program the ground based missile recapitalization and the fleet ballistic missile that I just mentioned there is going to be a significant amount of.

Defense budget proportionately spent on.

The nuclear.

Revitalization.

But also the conventional threats have gotten worse instead of better.

We look forward into the next two or three or four years, and that's going to be a budget issue for the U S government.

We've recommended and I think the services with the support of a steady production rate of 156 aircrafts starting again in the 2020 timeframe. When we can get back up to that based on the Covid recovery for our supply chain.

And I think Thats supportable and it takes about 80 U S aircrafts.

To make that happen per year with another 75, or so coming from international we see the international demand and it's going to be up to the us government to try to support that 80 number.

Between the congressional.

In FY 'twenty three.

We won't have that full ramp up yet.

Let me just to maybe add a little bit to it as well right.

Just to augment some of the things that we're seeing in 2023, we've got some expected abating headwinds when we go into 2020 for Jim mentioned, a little bit on supply chain.

In space as Jim mentioned SPM through other programs such as <unk> that will continue to grow and so we've got some things where were cycling down on 2023 on the <unk> program and even things like next Gen. <unk>, our <unk> again, those headwinds will abate as we get into 2024, Similarly, MFC Jim mentioned, the <unk> III <unk>.

Graham will see also continued growth there in the classified programs as well and then at RMS as Jim mentioned also CH 53, K. There's also other radar programs as well as joint all domain type programs like defense of Guam that will drive some growth in those years. So although these all of these areas and these programs are ones that we have pretty clear visibility to they do assume obviously that.

Theres abatement to an improvement in supply chain. That's 15 months from now for improvement that we expect to occur.

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

Yeah, Hi, Thanks for the question and Great Best of luck and good working with you.

I wanted to ask about future vertical lift Laura just what youre hearing from your customer there on the delays in <unk>.

Any indication of what's driving that and when do you think that that contract might be up.

Matt It's Jim the only thing we can say about the.

The schedule for Florida decision.

What the U S government puts out publicly so we don't have anything else to add to that.

It's their schedule and timeline and we think we've put in a terrific offer.

And I've seen the.

Thus far in Florida fly.

Can do it there is a video you can look at on Youtube that shows you how amazing. This helicopter technology is and it also gets you up to like a $230 to 50 not forward speed when you need it. So it gives the best of both worlds if youre in the rotorcraft business is a flyer.

Good forward speed.

It's faster than it's ever been for our traditionally design helicopter because of our counter rotating.

<unk> rotor.

Rotors.

And it also gives you the maneuverability even better.

Then many of the traditional helicopters could have provided so we think it's the best solution for the actual frontline army or other service pilot.

<unk> government.

See where they come out on that but the schedule is there is and we can't really comment on it.

Next we'll go to pizza Dubinsky with Alembic Global Advisors. Please go ahead.

Hey, good morning, guys, good morning, Greg and John Gregg enjoy retirement.

Jim Jim had a question on missiles and fire control.

I feel like the last few years you've had.

Production programs had been down that you mentioned this resurgence in the Pac three and say it seemed like you guys were pretty positive on a range of production programs Hi, Morris for instance, being one of them because of what we've seen the papers, but if we think about the midterm at missiles and fire control with this kind of resurgence in the production programs.

Is there a margin opportunity there now that you guys are seeing.

Whereas maybe the.

The production programs kind of start to shift back versus some of the hypersonic development projects.

So Pete I'd say, yes.

The legacy.

Gamblers javelin again, the products you kind of see in the in the news these days and a few others as well.

About six seven months ago, when we saw what was beginning to happen in eastern Europe .

I went over to visit some of the senior.

Officials in the Pentagon.

Basically took them a letter and said we're going to start spending on capacity.

A few of these systems, including the ones that you just asked about.

And now we've got a lot done already so for example.

Hi Mart specifically.

We've already got.

Met with our long lead supply chain to plan for increasing production of 96 of these units a year.

We advanced funded ahead of contract $65 million to shorten the manufacturing lead time that was without a contract or any other even.

<unk> or whatnot back from the government. We just went ahead and did that because we expected it to happen. So those parts are already being manufactured now.

The third thing we did was we.

Determined where we could open up another modern manufacturing facility to be able to.

<unk> products and <unk> got it ready early and we're cross training our skilled workforce across a bunch of product line. So as the demand grows and shifts across some of these products over the next few years, we're going to have people that cannot be fungible you move between them.

And then the last thing we did was to going back to this one ally Max.

Putting the best and newest manufacturing technology.

Into some of these product lines first so that when the ramp comes we can pivot to it quicker. So those are some of the things that we've done to actually capture some of the volume we expect to get and we do expect to get it both from the U S to.

To refill stocks as I mentioned earlier in the prepared remarks and also <unk>.

Pete just to follow up on that.

We do expect some sales upside there on some of these programs that Jim mentioned that is likely to be in the probably the starting in the 2024 timeframe given the long cycle nature of where we are.

That is probably more in 2024 and beyond 2023, we will see a step down from where they are this year in 2022 and the way to think about it is in the third quarter MFC did about $13 five whats implied in our guide for the fourth quarter as high <unk>, they're going to be in that mid <unk> range in that ballpark for 'twenty.

23, given some of these new increases in the programs that we've invested in and so we'll see a little bit of pressure there across the company really.

Given by MFC.

But again, we will see some of those mixed benefits come back to us in 'twenty four and beyond.

Next we'll go to Sheila <unk> with Jefferies. Please go ahead.

Thank you.

Good luck, Greg Thank you and good morning, gentlemen.

One for you maybe I wanted to ask about the share repurchase with Orion Boston.

From a dividend can you talk about how youre thinking about deployment as a percentage of free cash flow going forward and what we also know that Samsung made around the R&D tax credit perhaps that.

That could use a bottleneck maybe.

Jason So that as you think about mark market multiples coming down on some of the smaller company meetings.

<unk> Prime.

Pair up with Carl how do you think about taking advantage of that opportunity.

We purchased that barnacles.

Okay.

There's a lot there so let me maybe start with the share repurchase as I mentioned, both Jim and I mentioned in our prepared remarks, we're confident in long term outlook of the company. We saw this as an opportunity.

To really amplify the value creation that we see over the long term and we saw no better time to really now to get started on that here in the fourth quarter.

Profile.

As far as that we do are going to finance this fourth quarter.

Share repurchase program with the issuance of debt will be about $4 billion.

That will increase our interest expense next year, but again its all accretive.

We will see that again, our debt leverage ratio on an EBITDA basis will put us still below at or below one five times. So it's still a very.

Supportable and also very attractive as far as the R&D team.

<unk> capitalization really nothing has changed at the moment, we will see what happens as we move forward here in the fourth quarter first things first we got to get through the November elections, and then we had the exploration of the existing continuing resolution on December 16th it's possible through legislation. Therefore, new budget that we could see movement on tax expense.

That would include some type of either deferral or what we would prefer a repeal of the task capitalization policy and as you know.

We believe that it sound policy and we believe there's bipartisan support to remove any disincentives that that promote innovation and so thats a firm policy, that's something that we're firmly behind and will continue to push for.

Sheila when it comes to small and midsized companies teaming up with Lockheed Martin.

We're set up for that I can describe three ways in which we are ready now.

The pair up and team up with whether they are commercial or defense industrial base companies of smaller scale.

One is that we've had for years LM ventures like literally a VC house inside of Lockheed Martin.

It's been funded at $200 million level originally.

<unk> that have been made under that authorization are now worth about $400 million. So even if we mark to market a little bit lower we.

We had basically 100%.

Return on that initial investment.

The success.

Joined the company of the <unk>.

LM ventures program, a couple of years ago.

We want it had doubled the authorization. So we're looking where it is where to invest another $200 million.

Early stage companies.

At the next level.

And motivated team in J help us create what we can now call Lockheed Martin evolve or <unk> EV <unk> and what that's meant to do is to go at a step higher and say how do we do joint ventures or commercial alliances with midsized companies co invest.

Cetera, whether again, there is the commercial side or the.

The defense industrial base side or space industry in ways that.

We can take that outside of our rate structure and manage it and fund it in a different more creative way, so, whereas the VC space with our adventures were in the mid sized space space with Ela them evolve, which is just literally getting off the ground I'll say.

But we have the framework the structure and the ability to engage in that level.

Our level of investment now and then thirdly, something we've done over the years is acquire.

Small and medium companies with technologies are critical supply chain components that are available. So we will continue to do that as well. So those are the three routes.

We have in place up and running Ellen ventures, Elam evolve in the acquisition process to bring those kind of capabilities into or affiliation with Lockheed Martin.

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

Hey, good morning, Good morning, Rob Best of luck, Greg Jim I wanted to ask you a high level question, particularly because you are a pilot.

The Air Force is facing a shortage of pilots and the Navy is planning to have at least 60% of the carrier air wings on crude.

So given the Lockheed so strong unmanned aircraft I wanted to ask you about unmanned and the positioning there and how that fits into the long term plans of both the air Force and the Navy.

So Rob autonomy is one of the 14 critical technologies that we think are essential in the 20 <unk> century.

And so everyone's credit at the company.

We've been investing in Skunkworks in other parts of the company, including Sikorsky.

In autonomy for 15 plus years right. This is not an easy thing to do or an easy thing to get approved or regulated.

But the Lockheed Martin Sikorsky when it was part of UTC and thereafter had been working on autonomy for quite some time.

So the.

The aeronautics side of it I can't say much about because it's pretty highly classified but where we're far down the road on crude on crude teaming and.

In the January call, we expect to have hit a couple of milestones in that that I'll be able to explain in some more detail, but we want to get the.

Get the testing done before we talk about it.

But we're far down the road there mainly out of Skunk works as I said.

And then on the rotorcraft side.

If you get the aviation week from maybe three or four months ago that showed us of course key helicopter flying around with no people in it right.

I've actually flown in the matrix helicopter, we call it which is a DARPA project that's run out of Sikorsky.

It has three.

You plug the mission in.

In a trailer down Stratford, Connecticut.

Do you think it will take off go do their mission and come back and land itself. So it's really working already and then it's a matter of when.

As the U S government and the services ready to turn these technologies into programs of record, but we'll be ready when they are.

Our next question is from Cai von <unk> with Cowen. Please go ahead.

Yes.

Yes, let me join everybody and say thank you Greg for great job done and Maria welcome. So.

We haven't talked about inflation.

Are you guys seeing and assuming an inflation going forward and as you know Bill appliance is basically suggested the Doj should kind of kick in to help companies because the current level of inflation was not anticipated where the contract when the contracts were signed.

Yes, Senator Elizabeth Warren No big surprises.

That's not a good idea. So what are you seeing in inflation and what are you assuming going forward in terms of support.

Sure.

Inflation is two fold one on our own labor front, and then and what we see in the supply chain.

For our portfolio of business is a fair amount of our business that is somewhat insulated.

It's not fixed price and so some of the cost plus benefits that we get.

To our supply chain to us over that same period of time and so in many of those cases, we don't bear that risk either.

But it does come into factor as we're going into new bids and proposals with our customer we are seeing.

Acceptance of.

Economic price adjustments and Thats something that we do continue to have dialogue with our customers on.

And the existing contract that's subject to funding availability whats been somewhat difficult to actually obtain but I think going forward, that's something that certainly will be part of our negotiations and part of our contracting.

As far as labor is concerned we have increased our assumptions in our existing backlog contracts.

Been able to absorb that through productivity and other management reserve type of action. So we've not really seen much of an impact there, but it's certainly a watch item as we go forward.

Next we'll go to Seth <unk> with Jpmorgan. Please go ahead.

Hey, Thanks, very much good morning, everyone and Echo everyone's best to Craig and enter Maria.

I'm going to try and sneak two in here real quick just on Jay The Wall Street Journal This morning, saying that growth in 2024.

It should be low single digits is that is that right is that how we should think about it.

And then the second one I wonder if you could help us with the pension outlook for next year.

Both <unk> and caz.

And then just thinking about the cash outlook beyond 2024, and how that remaining balance kind of.

Trails off in the coming years.

Sure Seth, Yes, I think low single digit for 2024 as a baseline is the way you should look at it.

We talked on this call today that there are some upside opportunities to that baseline missed.

Missiles and fire control is certainly a prime opportunity Jim talked about opportunities related to <unk> and other programs and so there could be upside from where we are today.

Baseline is the appropriate level would be.

We're getting better clarity and I think we'll have a lot more clarity come January .

Provide our full guidance for 2023, and a better outlook on 2024.

As far as pensions.

No.

Involved.

We do expect the Fas income to come down Youre talking in the range of say $50 million.

On the cost side, we expect the cost cost to come down as well by.

By about $75 million, so the SaaS CAD adjustment all in we're expecting to come down by about $125 million Thats. If we struck things today as you know at the end of the year, we will have to true up and formally change, but thats based on what we see today.

As far as cash.

Rather we're going to have to get back to you in 'twenty, four and beyond and that Greg will have to come back to you Seth on that.

Okay.

Our next question is from Cristina <unk> with Morgan Stanley . Please go ahead.

Hey, good morning, everyone and Greg Congratulations and welcome Maria.

Jim and Jay Thank you for providing color on the specific headwinds in 2023, but maybe taking a step back for a 30000 foot view the defense budget environment is pretty robust we saw the 22 budget request up mid single digits.

Military aid so far adds another 10% to the 22 modernization budget. So your book to Bill also year to date is one one times I guess I would've thought that these items could have offset this specific 2023 headwinds you've called out so maybe absent the specific programs you mentioned should we expect that.

Portfolio to grow above below or in line with the overall Dod budget.

So Christine good morning.

I would say first of all that.

The defense budget is expected to go above and beyond what the President's original submission was a few months back in 2023 right.

Now, even if that happens and we do expect that to happen and I would just point out a couple of.

Programs that probably would benefit from that.

<unk> C 130 in that.

F 35 production, but it hasnt happened yet so we're not putting it into our forecast and let me just take a minute to step back and really reemphasize, what Jay said.

Net.

We don't have enough real information right now.

Early in the fourth quarter of the year.

Even give much more than our estimate of what the trend will be next year. So.

Starting in 2024, we're going to start doing January guidance. That's formal we're not going to do anything ahead of that and I'll tell you. The three issues that I've learned in my couple of years and management here. We just don't have clarity on one is the defense budget, which you've just raised a minute ago, we don't know what it's going to be.

Status of what the supply chain health is going to be in even in 2023, yet because if there is another COVID-19 spike in the winter like there was last time.

We're going to have effects in our supply chain. So there is those three issues really makes it I think almost.

It's impossible to give you really high confidence trending information, which has been a tradition at the company when the defense budget was rising 5% to 10% a year.

But that's not in there was no COVID-19 by the way, but that's not the situation now so we're going to start next cycle without trying to give you a trend line in October we'll give you is solid as a formal guidance as we can in June of 2024 because of all of this.

Having said that even on the products, we fully anticipate are going to get increases because there have been actions inside of government.

It could happen.

I used the analogy last call of the clutch wasn't engage yet or even on the order process and paperwork that needs to come to us. So we can actually start production.

The way I would characterize it now is that the clutches engaging but into some lower gears.

Initially right. So the process has started.

I really give Dr. Lu plant now Theres, a lot of credit Andrew Hunter and the Air Force et cetera, The secretary of the Air Force Navy and.

An army departments are all engaged in making this happen.

Many of the MSC products, we've already talked about.

Black Hawk demand.

Internationally, especially as ginning up and as well as F. 16, So I think theres a lot of significant areas, where the company can benefit with an additional defense budget.

Kris.

Yes.

Kristina, we fully expect that as Jim mentioned to participate in this industry upside youre going to see that in the orders in the backlog and what we're talking about here is converting that to sales, taking a little bit longer than expected I think the important thing to remember in terms of 2023 is that in spite of the lower outlook from sales perspective, even the margin.

Russia, we're still delivering the same amount of free cash flow that we told you a year ago and our free cash flow per share outlook has gotten better because of our share repurchase program.

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

Yes.

Good morning, everyone. Good morning, Tim.

Tim can you can you hear me, yes, we can good morning, great and congratulations Greg I appreciate all your all your effort.

Hey, Jay just maybe you made Jim made a comment about the aeronautics kind of flat.

To kind of slightly down in 'twenty, three but then sustainment becomes a bigger piece of the story as we get into 'twenty four.

Yes, I think so I think next year theyre dealing with some of the transition related to the changes in delivery profiles on the F 35 production contract.

And again, we're just catching up some inventory because of some of the delivery profile has moved around.

Yes, and I would also.

Theyre Peter that we're starting to get some real traction on our <unk> offerings. So to speak and one of them has been mentioned briefly today I'll call defense of Guam and Thats the.

Really first.

Well highly organized EOD.

Major contract to come out.

That really drives the capability and not just a product or system and what it's meant to do is integrate and this is our whole <unk> Dot mill approach actually that's why we wanted I think.

In this way so I think this is going to be a real pathfinder for the future and once this demonstrates that it can be a success and industry has got to coalesce and help make it happen with us.

We as an industry, we'll see more of these opportunities.

Thousand 24, plus timeframe too.

Our next question is from George Shapiro with Shapiro Research. Please go ahead.

Yes, good morning.

A couple of questions on the.

Aeronautics area.

<unk> 16 gain as supposed to get in queue for Jay does that come with some added sales that you may be working on now as well and then a second question. If you look at the incremental margin on the profit you provided on the F 35, and the $325 million of sales.

21% does that imply that you increased the margin on the F 35.

Program and will that help the margin next next year or is it more than offset by the growth in.

Sustainment.

Second question, George we did have a profit adjustment on the F 35 program and the production program. There. So we will see.

Moving forward a higher recurring margin rate there is.

As far as Q4, and <unk> 16, yes, we do expect that order in the fourth quarter as Jim mentioned, a little bit over $8 billion.

We do expect a ramp up in sales at arrow, including F 35, and that will include F. 16. So to answer your question, yes that would certainly be part of the sales mix here in the fourth quarter.

Next we'll go to rich Safran with Seaport Research partners. Please go ahead.

Jim Jay Greg Maria Good morning, how are you.

Good morning Rich.

So.

Tim I heard your opening remarks about uncertainties on the supply chain and all of that.

And Jay going to push you a little bit on the spot here and hopefully get you an answer or a long term cash flow outlook question, because I think last year, you gave a long term cash flow outlook and even added a year.

So you've been talking long term this morning, and recognizing there's not a lot of high confidence here.

You have enough visibility to give us a long term cash flow update and if possible could you couch that in terms of buybacks and free cash flow per share.

Well.

Rich. So if you think about our free cash flow last year, and I am going off a little bit off recall here, we said $6 1 billion in 'twenty three I believe it was $6 2 billion in 2024, I don't see any reason why we can't deliver that and continue to deliver that level of free cash flow.

<unk> 23, and 24, so in our free cash flow again with the share repurchase program will get better and what we are saying a year ago again, just our management focus on working capital and management focus discipline and delivering free cash flow, obviously not going to stop after one year and so I'm pretty confident that.

Okay.

Hey, John This is Greg I think we've come up to the top of the hour so with that I'll turn the call back over to Jim.

Sure Greg Thanks, I'd like to conclude today by again, reinforcing what Jay just talked about our commitment to delivering long term attractive and reliable total returns to shareholders.

<unk> by our strong cash generation and a robust balance sheet.

As well as delivering on these 20 <unk> century solutions to meet the challenges that our customers are facing and global security right now.

<unk>.

Some of you might have.

Been around when I was at American Tower, we focus.

Completely on free cash flow per share generation and that got us through 18 years of up and down cycles, the great recession and a few other issues that happen along the way that's the right metric for this company too and that's why Jay and I are so.

Emphasis is so much emphasizing it today, so we're positioning ourselves for anticipated growth inflection in the next few years.

Investing in innovative technologies for our customers missions as I said and strong repurchases along the way to amplify.

The per share value creation as we go so thanks again for joining us today and we look forward to speaking with all of you on our next earnings call in January John .

Don that concludes the call thanks, everybody.

Ladies and gentlemen, thank you for your participation you may now disconnect.

Q3 2022 Lockheed Martin Corp Earnings Call

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