Q3 2025 Lockheed Martin Corp Earnings Call

Again, Please press Star then one now at this time for opening remarks, and introductions I would like to turn the call over to Maria Richard on Vice President Treasurer, and Investor Relations. Please go ahead.

Thank you Sarah and good morning, I'd like to welcome everyone to our third quarter 2025 earnings Conference call. Joining me today on the call are Jim <unk>, Our chairman, President and Chief Executive Officer, and Evan Scott, Our Chief Financial Officer.

Statements made today that are not historical fact are considered forward looking statements and are made pursuant to the safe Harbor provisions of federal Securities laws.

Speaker #1: Good Good day, and welcome everyone to the Lockheed Martin third quarter 2025 earnings results conference call. Today's call is being recorded. If you would like to ask a question, please press star then one now.

<unk> results may differ materially from those projected in the forward looking statements. Please see Lockheed Martin and SEC filings, including our 2024 annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q for a description of some of the factors that may cause actual results to differ materially from those in the <unk>.

Speaker #1: At this time, for opening remarks and introductions, I would like to turn the call over to Maria Ricciardone, Vice President, Treasurer, and Investor Relations.

Forward looking statements.

Speaker #1: Please go ahead.

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 will turn.

Speaker #2: Thank you, Sarah, and good morning. I'd like to welcome everyone to our third quarter 2025 earnings conference call. Joining me today on the call are Jim Taiclet, our Chairman, President, and Chief Executive Officer, and Evan Scott, our Chief Financial Officer.

Speaker #2: Statements made today that are not historical fact are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities laws.

The call over to Jim Thanks, Maria Good morning, everyone and thank you for joining us on our third quarter 2025 earnings call.

Speaker #2: Actual results may differ materially from those projected in the forward-looking statements. Please see Lockheed Martin's SEC filings, including our 2024 annual report on Form 10-K, and subsequent quarterly reports on Form 10-Q, for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements.

Lockheed Martin delivered strong operational and financial performance across all four of our business areas in the quarter, we secured a number of significant wins across a range of our marquee programs that drove our backlog to a record high of $179 billion.

Our relentless attention to operational execution in every facet of our business resulted in elevated sales growth and substantial cash generation as well.

Speaker #2: 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.

Meanwhile, we're also positioning the company for what we see is even greater demand for the iconic Lockheed Martin products and systems needed by the U S and its allies to ensure deter us from potential great power arm conflict as I have said Lockheed Martin is in the aerospace and defense industry, but in the deterrence.

Speaker #2: Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the charts. With that, I will turn the call over to Jim.

Speaker #3: Thanks, Maria. Good morning, everyone, and thank you for joining us on our third quarter 2025 earnings call. Lockheed Martin delivered strong operational and financial performance across all four of our business areas in the quarter.

Business.

We are in active discussions with our customers in both the U S and abroad on scaling up development and production of essential elements to deliver on the goal of peace through strength.

Speaker #3: We secured a number of significant wins across a range of our marquee programs, that drove our backlog to a record high of $179 billion.

These systems include Air Defense radars missiles space based interceptors state of the Art Open architecture command and control systems and the world's most advanced fighter aircraft is just a few examples.

Speaker #3: Our relentless attention to operational execution in every fast of our business resulted in elevated sales growth and substantial cash generation as well. Meanwhile, we're also positioning the company for what we see as even greater demand for the iconic Lockheed Martin products and systems needed by the U.S.

And every step of the way we remain highly focused on enhancing program performance in terms of cost quality and schedule, while reducing risk through internal production systems modernization and continuous improvement methods.

Speaker #3: ...and its allies to ensure deterrence. From potential great power armed conflict, as I have said, Lockheed Martin is in the aerospace and defense industry, but in the deterrence business.

As noted in the third quarter, we retrieve record backlog of 179 billion.

As demand for our reliable advanced solutions remains solid.

Speaker #3: We are in active discussions with our customers in both the U.S. and abroad on scaling up development and production of the essential elements to deliver on the goal of peace through strength.

Multiyear awards on Pac three Jassem, lorazepam, and CH 53, K totaled $30 billion in the quarter.

Speaker #3: These systems include air defense, radars, and missiles, space-based interceptors, state-of-the-art open architecture command and control systems, and the world's most advanced fighter aircraft, as just a few examples.

And provide production rate visibility into the next decade.

And shortly after the conclusion of the quarter we.

We definitely as the F 35, <unk> 18, and 19 contract with the Department of Wars Joint program office, adding $11 billion of contract value and another 151 aircraft into backlog.

Speaker #3: In every step of the way, we remain highly focused on enhancing program performance in terms of cost, quality, and schedule. While reducing risk through internal production systems, modernization, and continuous improvement methods.

Our financial results in the third quarter reflect these trends sales increased 9% year over year and a solid 5% normalized for the lot 18, 19 impact in last year's third quarter, we generated strong free cash flow of over $3 billion in the quarter, enabling our commitment to further invest in the business.

Speaker #3: As noted in the third quarter, we've achieved a record backlog of $179 billion as demand for our reliable, advanced solutions remains solid. Multi-year awards on PAC-3, JASM-LRASM, and CH-53K totaled $30 billion in the quarter.

<unk>, while simultaneously driving returns to shareholders through recurring dividends and our disciplined share repurchase program.

Speaker #3: And provide production rate visibility into the next decade. And shortly after the conclusion of the quarter, we definitized the F-35 Lot 18 and 19 contract with the Department of War's Joint Program Office, adding $11 billion of contract value and another $151 aircraft in to backlog.

Earlier in October our board approved a 5% increase in our quarterly dividend and increased our share repurchase authorization. This marks the 23rd consecutive year of dividend increase for the company and demonstrates our continued confidence in Lockheed Martin stable financial performance.

Speaker #3: Our financial results in the third quarter reflect these trends. Sales increased 9% year over year, and a solid 5% normalized for the Lot 18, 19 impact in last year's third quarter.

Looking forward, we are updating our outlook for the remainder of 2025, increasing expectations for sales segment operating profit and earnings per share. We remain focused on operational performance and capitalizing on the unprecedented demand cycle to deliver mid single digit top line growth in 2025.

Speaker #3: We generated strong free cash flow of over $3 billion in the quarter, enabling our commitment to further invest in the business, while simultaneously driving returns to shareholders through recurring dividends and our disciplined share repurchase program.

While generating $6 6 billion.

Free cash flow Evan will provide additional detail on the free cash flow elements in our full year outlook in his prepared remarks.

Speaker #3: Earlier in October, our board approved a 5% increase in our quarterly dividend and increased our share repurchase authorization. This marks the 23rd consecutive year of dividend increase for the company, and demonstrates our continued confidence in Lockheed Martin's stable financial performance.

Circling back to the new business, we secured this quarter at missiles and fire control our expertise in developing and producing reliable precision strike weapons and integrated air and missile defense solutions at scale continues to be highly valued by our customers.

Speaker #3: Looking forward, we are updating our outlook for the remainder of 2025: increasing expectations for sales, segment operating profit, and earnings per share. We remain focused on operational performance and capitalizing on the unprecedented demand cycle to deliver mid-single-digit top-line growth in 2025, while generating $6.6 billion of free cash flow.

First on Pac three the U S Army awarded Lockheed Martin a $9 $8 billion contract for the production of nearly 2000 Pac three MSE interceptors and associated hardware. This marks the largest contract in MFC history and demonstrates the sustained demand for this advanced and proven interceptor.

From U S and international partners, some of which you've read his latest this week and the press.

Speaker #3: Evan will provide additional detail on the free cash flow elements and our full-year outlook in his prepared remarks. Circling back to the new business we secured this quarter, our missiles and fire control expertise in developing and producing reliable precision strike weapons and integrated air and missile defense solutions at scale continues to be highly valued by our customers.

Our teams continue to proactively partner with suppliers and customers to invest in Pac three capabilities and production capacity to support the elevated and enduring demand. We see for this critical mission defending against ballistic cruise hypersonic and airborne threats.

Next on Jasmine Lorazepam, we definitively are large lot procurement contract for $9 $5 billion with the U S Air Force and Navy customers.

Speaker #3: First on PAC 3, the U.S. Army awarded Lockheed Martin a $9.8 billion contract for the production of nearly 2,000 PAC 3 MSE interceptors, and associated hardware.

This multiyear award supports increased production quantities of these proven cruise missile systems and helps build a more resilient industrial base.

Speaker #3: This marks the largest contract in MSE history and demonstrates the sustained demand for this advanced and proven interceptor from U.S. and international partners, some of which you've read about as late as this week in the press.

We look forward to partnering with the U S government to execute and deliver this long range highly survivable and effective capability to our airmen sailors and marines for years to come.

Speaker #3: Our teams continue to proactively partner with suppliers and customers to invest in PAC 3 capabilities, and production capacity to support the elevated and enduring demand we see for this critical mission.

Moving to rotary and mission systems. The U S Navy awarded Sikorsky at $10 $9 billion multi year contract to build up to 99, CH 50, <unk> King stallion helicopters for the U S. Marine Corps over five years. This is the largest quantity order to date for that aircraft and the largest car.

Speaker #3: Defending against ballistic, cruise, hypersonic, and airborne threats. Next, on JASM and LRASM, we definitized a large lot procurement contract for $9.5 billion with the U.S.

Track toward ever in RMS history.

This ensures consistent deliveries of America's most powerful heavy lift helicopter into the next decade and enables long term affordability optimized production efficiency and stability for our supply chain.

Speaker #3: Air Force and Navy customers. This multi-year award supports increased production quantities of these proven cruise missile systems, and helps build a more resilient industrial base.

Speaker #3: We look forward to partnering with the U.S. government to execute and deliver this long-range, highly survivable and effective capability to our airmen, sailors, and marines for years to come.

In our space portfolio, we received additional contract value and funding on the next generation Interceptor program in the quarter, helping to increase backlog for our space business to a new high of $38 billion with NCI. We continued to advance the program as we progress through development and begin preparing.

Speaker #3: Moving to rotary and mission systems, the U.S. Navy awarded Sikorsky a $10.9 billion multi-year contract to build up to 99 CH-53K King Stallion helicopters for the U.S.

For production.

In addition, our space team secured multiple contract research and development Awards. This quarter. These crowd awards as they're known demonstrate our ability to co invest with the government partners and accelerate the delivery of revolutionary solutions with each crowd initiatives strategically targeted targeted to support key missions.

Speaker #3: Marine Corps over five years. This is the largest quantity ordered to date for that aircraft and the largest contract award ever in RMS history.

Speaker #3: This ensures consistent deliveries of America's most powerful heavy lift helicopter, ter, into the next decade, and enables long-term affordability, optimized production efficiency, and stability for our supply chain.

For the U S government.

Also of note in the quarter the fleet ballistic missile or SPM system conducted yet another successful flight test demonstrating its continued readiness to provide the world's most potent and survivable nuclear deterrent.

Speaker #3: In our space portfolio, we received additional contract value and funding on the next-generation interceptor program in the quarter, helping to increase backlog for our space business to a new high of $38 billion.

This also marks 70 years of Lockheed Martin support to the U S. Navy on this critical program.

Speaker #3: With NGI, we continue to advance the program as we progress through development and begin preparing for production. In addition, our space team secured multiple contract research and development awards this quarter.

Going forward, both <unk> and SPM will benefit from the internal investment we are making in new state of the art facilities to enable rapid reliable and cost effective component production and assembly for these crucial systems.

Speaker #3: These crowd awards, as they're known, demonstrate our ability to co-invest with the government partners, and accelerate the delivery of revolutionary solutions, with each crowd initiative strategically targeted to support key missions for the U.S.

All in these awards underscore the trust and confidence that our customers place in us and which in turn underpins our company's long term solid growth prospects.

Speaker #3: government. Also of note in the quarter, the Fleet Ballistic Missile, or FBM system, conducted yet another successful flight test, demonstrating its continued readiness to provide the world's most potent and survivable nuclear deterrent.

Shifting gears to F 35 during the third quarter, we delivered 46 aircraft and now expect between 175 and 190 deliveries in 2025, that's essentially one aircraft delivery every working day of the year.

Speaker #3: This also marks 70 years of Lockheed Martin support to the U.S. Navy on this critical program. Going forward, both NGI and FBM will benefit from the internal investment we are making in new state-of-the-art facilities, to enable rapid, reliable, and cost-effective component production and assembly, for these crucial systems.

Since program inception, we have delivered over 1200 F 35 aircraft that have amassed over 1 million flight hours, providing control of the sky and seamless interoperability between U S and Allied forces the.

The recent lot 18, and 19 award reemphasize the growing demand for the F 35, which is the worlds most advanced fighter jet currently in production.

Speaker #3: All in, these awards underscore the trust and confidence that our customers place in us, which in turn underpins our company's long-term solid growth prospects.

Over the years to come the U S and 19 International Allies will continue to progress toward a planned global fleet of over 3500 aircraft.

Speaker #3: Shifting gears to F-35, during the third quarter we delivered 46 aircraft, and now expect between 175 and 190 deliveries in 2025. That's essentially one aircraft delivery every working day of the year.

Moreover, we finalize the $15 billion air vehicle Sustainment contract with the joint program office. The four year deal provides for aftermarket activities such as spare parts provisioning maintenance repair and other support services through 2028. This long term agreement will.

Speaker #3: Since program inception, we've delivered over 1,200 F-35 aircraft, that have amassed over $1 million flight hours. Providing control of the sky and seamless interoperability between U.S.

Port our key objective to improve the readiness of the aircraft fleet as it continues to expand the number and supports the revenue growth trajectory for our F 35 Sustainment business.

Speaker #3: and allied forces. The recent Lot 18 and 19 award reemphasizes the growing demand for the F-35, which is the world's most advanced fighter jet currently in production.

Finally, we are also heavily committed to support the ongoing modernization and upgrade of the aircrafts capabilities, particularly the introduction of what's known as block for enhancements to a number of aircraft systems.

Speaker #3: Over the years to come, the U.S. and 19 international allies will continue to progress toward a planned global fleet of over 3,000,500 aircraft. Moreover, we finalized the $15 billion air vehicle sustainment contract with the joint program office.

At the same time Lockheed Martin has already moved out on engineering analysis at my direction to design and bring even more advanced capabilities from our sixth generation research and development efforts that we conducted our skunkworks operation in California.

Speaker #3: The four-year deal provides for aftermarket activities, such as spare parts provisioning, maintenance, repair, and other support services through 2028. This long-term agreement will support our key objective to improve the readiness of the aircraft fleet as it continues to expand in number, and supports the revenue growth trajectory for our F-35 sustainment business.

We are aspiring to enhance the relevance and capability of our fifth generation platforms. The F 35, and the F 22 to provide the greatest aggregate level of air superiority capability at the most efficient cost and the fastest deployment. This is a total best value approach that we think will be best for the day.

<unk>.

That and we are working closely with our customers to align our internal investments was their most important mission priorities for the F. 35 for example of the strategic enhancements include advanced and expanded weapons compatibility improved data links autonomous drone wingman integration.

Superior sensors, and the latest electronic warfare capabilities.

Now turning to the budget.

Watching Congress work through the F. Slide 26 appropriation bills and the government shutdown, we continue to see broad support through all of this for National defense priorities, given the unsettled geopolitical situation.

The strength of our backlog reflects the importance of Lockheed Martin systems, and deterring global conflict.

We will continue to partner with the administration Congress and our customers to provide the absolute best defense technologies as this budget process is finalized.

The homeland Defense mission, including Golden Dome for America is one opportunity for what's Lockheed Martin is ready and well positioned with existing products expertise and production capabilities.

Although details of the initiatives architecture and acquisition plan continue to take shape. The space domain is expected to play a vital role in Lockheed Martin continues to make significant progress to advance space based defense.

Earlier this quarter. The first next Gen Geo R. N G. G missile warning system satellite was successfully completed.

It's finished environmental testing it's on track to provide the next level of global surveillance and detection of missile threats from space.

We also submitted proposals for space based interceptors.

We will continue to partner with the administration Congress and our customers to provide the absolute best defense Technologies. As this budget process is finalized.

We will continue to partner with the administration Congress and our customers to provide the absolute best defense Technologies. As this budget process is finalized.

And other emerging technologies, and we're actually planning for real on orbit space space Interceptor demonstration by 2028.

Further led by RMS Lockheed Martin has built a prototyping environment at our center for innovation in Virginia to support the collaborative development of a Golden Dome for America <unk>.

The Homeland defense Mission, including golden dome for America is 1 opportunity for which Lockheed Martin is ready and well, positioned with existing products, expertise and production capabilities.

The Homeland defense Mission, including golden dome for America is 1 opportunity for which Lockheed Martin is ready and well, positioned with existing products, expertise and production capabilities.

And control capability.

Through a series of demonstration Lockheed Lockheed Martin's open systems architecture is already fusing existing and new <unk> capabilities from seabed to space and importantly, these capabilities are not limited to our own.

Although details of the initiatives, architecture and acquisition plan continue to take shape, the space domain is expected to play a vital role and Lockheed Martin continues to make significant progress to Advanced space-based defense.

Although details of the initiatives, architecture and acquisition plan continue to take shape, the space domain is expected to play a vital role and Lockheed Martin continues to make significant progress to Advanced space-based defense.

Earlier, this quarter, the first next-gen Geo or NG G missile warning system satellite was successfully completed.

Earlier this quarter, the first next-gen go or NG g g missile. Warning system satellite was successfully completed.

We have a broad team of industry partners that are participating in the prototype system development, ensuring that the U S. Government has access to the best available solution for each element of the eventual Golden Dome command and control system.

Provide the next level of global surveillance and detection of missile threats from space.

Finished environmental testing. It's on track to provide the next level of global surveillance and detection of missile threats from space.

We also submitted proposals for space-based interceptors.

We also submitted proposals for space-based interceptors.

At the same time, we're rapidly increasing production capacity across the missiles sensors Battle management systems and satellite integration opportunities that will be directly relevant to achieve the overarching objective of golden down and that is to strengthen deterrence against an attack against the U S homeland.

And other emerging Technologies and we're actually planning for a real on orbit space base Interceptor demonstration by 2028.

And other emerging technologies, and we're actually planning for a real on-orbit space-based interceptor demonstration by 2028.

Further led by RMS lied. Martin has built a prototyping environment at our Center for innovation in Virginia to support the collaborative. Development of a golden dome for America command and control capabilities.

Further led by RMS lied. Martin has built a prototyping environment at our Center for innovation in Virginia to support the collaborative. Development of a golden dome for America command and control capabilities.

And and if necessary defeated.

I'll now turn it over to Evan to share more about our financial results before we open up the call to your questions.

Thanks, Jim and good morning, everyone. Today, I'll provide an overview of our consolidated financials and highlight a handful of operational items in the quarter before handing it off to Maria who will cover <unk> results and then we'll come back to discuss the updated 2025 outlook.

Through a series of demonstrations Lai. Lai Martin's open systems, architecture is already fusing existing and new C2 capabilities from seabed to space. And importantly, these capabilities are not limited to our own

Through a series of demonstrations. Lie, Martin's open systems, architecture is already fusing existing and new C2 capabilities from seabed to space and importantly, these capabilities are not limited to our own

Starting on chart four third quarter sales were $18 6 billion.

We have a broad team of Industry partners that are participating in the Prototype system development, ensuring that the US government has access to the best available solution for each element of the eventual, golden dome command and control system.

We have a broad team of industry partners participating in the prototype system development, ensuring that the U.S. government has access to the best available solution for each element of the eventual golden dome command and control system.

Up 9% year over year, driven by Aeronautics missiles, and fire control and space.

Adjusting for the F 35 lot 18 award timing impact on revenue in Q3 of last year to normalized year over year growth was still a solid 5%.

Next segment operating operating profit of $2 billion was up 9% year over year, resulting in a 10, 9% segment margins.

At the same time, we're rapidly increasing production capacity across the missiles, sensors, battle management systems, and satellite integration opportunities that will be directly relevant to achieving the overarching objective of Golden Dome. That is to strengthen deterrence against an attack on the U.S. homeland.

At the same time, we're rapidly increasing production capacity across the missiles, sensors, battle management systems, and satellite integration opportunities that will be directly relevant to achieving the overarching objective of the Golden Dome. That is to strengthen deterrence against an attack on the U.S. homeland and, if necessary, defeat it.

and if necessary defeated

I'll now turn it over to Evan to share more about our financial results. Before we open up the call to your questions.

I'll now turn it over to Evan to share more about our financial results. Before we open up the call to your questions.

Similar to sales adjusting for F 35, the normalized growth was 5%.

Moving to earnings per share, we generated $6 95 in the third quarter up 15 year over year, primarily driven by the higher segment earnings and lower share count, partially offset by lower total SaaS Cas pension adjustment and a higher tax rate.

Thanks Jim and good morning everyone. Today, I'll provide an overview of our consultative financials and highlight a handful of operational items in the quarter before handing it off to Maria who will cover business area results. And then I'll come back to discuss the updated 2025 Outlook.

Thanks Jim and good morning everyone. Today, I'll provide an overview of our consultative financials and highlight a handful of operational items in the quarter before handing it off to Maria who will cover business Theory results. And then I'll come back to discuss the updated 2025 Outlook.

Taking a closer look at taxes, while the 16, 5% effective rate in the quarter was up from the prior year it was considerably lower than our prior estimate.

Starting out chart 4, third quarter sales were 18.6 billion. Up 9% year-over-year, driven by Aeronautics missiles and Fire, Control and space.

Starting out chart 4, third quarter sales were 18.6 billion. Up 9% year-over-year, driven by Aeronautics missiles and Fire, Control and space.

The primary driver of the lower rate was increased research and development credits related to prior year favorable federal federal income tax audit resolutions.

Adjusting for the F-35. Lot 18 award. Timing impact on Revenue in Q3 of last year, the normalized year-over-year growth was still a solid 5%.

Adjusting for the F-35 Lot 18 award, the timing impact on revenue in Q3 of last year resulted in a normalized year-over-year growth of a solid 5%.

Overall these benefits reduced the effective tax rate this quarter with favorability expected to carry through to the full year.

Next segment offering operating profit of 2 billion dollars. Was up 9% year-over-year. Resulting in 10.9% segment margins.

Next segment offering operating profit of 2 billion dollars. Was up 9% year-over-year. Resulting in 10.9% segment margins.

Similar to sales adjusting for F-35, the normalized growth was 5%.

As Jim mentioned in the third quarter, we saw strong bookings across the business totaling over $31 billion in orders, resulting in a one seven book to Bill ratio and we're off to a strong start to <unk> with the F. 35 lot 18, 19 award additional funding associated with the <unk> multi year Award.

Moving to earnings per share. We generated 6.95 in the third quarter up 15 cents year-over-year primarily driven by the higher segment earnings and lower share count partially offset by lower total Fast, Cash, pension adjustment and a higher tax rate,

Moving to earnings per share, we generated $6.95 in the third quarter, up 15 cents year-over-year, primarily driven by higher segment earnings and a lower share count, partially offset by lower total Fast Cash, a pension adjustment, and a higher tax rate.

And the contract modification on the Trident II <unk> fleet ballistic missile life extensions.

Shifting to cash we generated $3 3 billion of free cash flow in the third quarter.

Taking a closer look at taxes. While the 16.5% effective rate in the quarter was up from the prior year, it was considerably lower than our prior estimates.

Taking a closer look at taxes, while the 16.5% effective rate in the quarter was up from the prior year, it was considerably lower than our prior estimate.

Our year to date total to over $4 1 billion.

The strength in the quarter was driven by working capital improvement mainly on the F 35 program as part of the plant payments associated with the lot 18, and 19 agreements.

The primary driver of the lower rate was increased research and development credits related to Prior year favorable federal federal income tax audit resolutions.

The primary driver of the lower rate was increased research and development credits related to prior year favorable federal income tax audit resolutions.

Overall, these benefits reduced the effective tax rate. This quarter with favorability expected to carry through to the full year.

Overall, these benefits reduced the effective tax rate. This quarter, favorability is expected to carry through to the full year.

Lower cash tax payments also helped as we rolled through the through the <unk> impacts.

Finally, looking at cash deployment in the quarter, we continued to fund organic growth and innovation efforts with approximately $900 million go into capital expenditures and internal research and development activities.

In addition, we returned approximately $1 8 billion to shareholders through dividends and share repurchases, bringing the total year to date to $4 6 billion or 110% of free cash flow.

As Jim mentioned, in the third quarter, we saw strong bookings across the business totaling over 31 billion dollars in orders. Resulting in a 1.7 book to Bill ratio and we're off to a strong start to 4 queue with the F-35 lot, 1819, award additional funding associated, with the PAC 3 multi award and the contract modification on the Trident 2 D5 Fleet. Ballistic missile life extension

We remain committed to our disciplined capital allocation policy and accordingly remained committed to returning capital to shareholders.

Shifting to cash, we generated $3.3 billion of free cash flow in the third quarter, bringing our year-to-date total to over $4.1 billion.

Shifting to cash. We generated 3.3 billion of free cash flow in the third quarter, bringing our year-to-date total to over 4.1 billion dollars

Turning to some other highlights in the quarter.

At Aeronautics in addition to the F 35 lot 18, 19 Award Jim previously mentioned international demand for the jet remained strong with Belgium, and Denmark, both announcing attentions to expand their fleets.

the strength in the quarter was driven by working capital Improvement, mainly on the F-35 program, as part of the plan payments associated with the lot, 18 and 19 agreement,

The strength in the quarter was driven by working capital improvement, mainly on the F-35 program, as part of the planned payments associated with the Lot 18 and 19 agreement.

Lower cash, tax payments also helped as we roll through the OBBA impacts.

Lower cash, tax, and payments also helped as we roll through the OBBA impacts.

Belgium seeking to procure an additional 11 aircraft and Denmark expressing interest in adding 16 aircraft to the existing program of record with.

With steady demand from our international allies for the F 35 demonstrates the unmatched capability of aircrafts and gives us confidence in sustained long term production.

Finally, looking at Cash deployment in the quarter, we continue to fund organic growth and Innovation, efforts with approximately 900 million going to Capital expenditures and internal research and development activities.

Finally looking at Cash deployment in the quarter, we continue to fund organic growth and Innovation efforts with a proximately 900 million going to Capital expenditures and internal research and development activities.

As for the classified program at Aeronautics, we will continue to proactively monitor and manage the risks and opportunities and there were no additional charges recorded limit program in the quarter.

In addition we returned, approximately 1.8 billion dollars to shareholders through dividends and share repurchases, bring the total year-to-date to 4.6 billion or 110% of free cash flow.

In addition, we returned approximately $1.8 billion to shareholders through dividends and share repurchases, bringing the total year-to-date to $4.6 billion or 110% of free cash flow.

Within the MSC, we continued to advance our international strategy.

Speaker #3: Finally, we are also heavily committed to support the ongoing modernization and upgrade of the aircraft's capabilities. Particularly the introduction of what's known as Block 4 enhancements, to a number of aircraft systems.

We remain committed to our disciplined Capital, allocation policy and accordingly remain committed to returning Capital to shareholders.

We remain committed to our disciplined capital allocation policy and, accordingly, remain committed to returning capital to shareholders.

The global mobile artillery rocket system or <unk> program completed a major milestone launching two geo modus rounds at our lifeblood event at White Sands missile range validating the launches performance and ability to integrate the MLR Rs family munitions or inbound.

Turning to some other highlights in the quarter.

Turning to some other highlights in the quarter.

Speaker #3: At the same time, Lockheed Martin has already moved out on engineering analysis at my direction to design and bring even more advanced capabilities from our sixth-generation research and development efforts that we conduct at our Skunk Works operation in California.

In addition to the F-35, lot 1819 award. Jim previously mentioned International demand for the jet remained, strong with Belgium and Denmark. Both announcing intentions to expand their fleets.

At Aeronautics, in addition to the F-35, Lot 1819 was awarded. Jim previously mentioned that international demand for the jet remains strong, with Belgium and Denmark both announcing intentions to expand their fleets.

This successful test demonstrates Lockheed <unk> ability to adapt to regional needs in Europe and partnered to create something new a precision fires launcher that is interoperable with NATO assets.

Belgium seeking to a cure, an additional 11 aircraft and Denmark expressing interest in adding 16 aircraft to their existing program of record.

Belgium seeking to procure an additional 11 aircraft and Denmark expressing interest in adding 16 aircraft to their existing program of record.

Speaker #3: We are aspiring to enhance the relevance and capability of our fifth-generation platforms, the F-35 and the F-22, to provide the greatest aggregate level of air superiority capability, at the most efficient cost, and the fastest deployment.

We expect programs like <unk> to support the long term international growth, we anticipate with NMFC and across the broader portfolio through the end of the decade.

The steady demand from our International allies for the F-35 demonstrates, the unmatched capability of the aircraft and gives us confidence and sustained long-term production.

The steady demand from our international allies for the F-35 demonstrates the unmatched capability of the aircraft and gives us confidence in sustained long-term production.

Moving to RMS and building upon Jim's comments regarding our work at the center for innovation led to Golden Dome.

As for the classified program Aeronautics, we will continue to proactively Monitor and manage the risks and opportunities and there are no additional charges recorded on the program in the quarter.

As for the classified program at Aeronautics, we will continue to proactively monitor and manage the risks and opportunities, and there were no additional charges recorded on the program in the quarter.

Speaker #3: This is a total best value approach that we think will be best for the department. To that end, we are working closely with our customers to align our internal investments with their most important mission priorities for the F-35.

Another broke prospect and the integrated and scalable situ domain is the next generation command and control or <unk> program.

Within MFC, we continue to advance our International strategy.

Within that MSC we continue to advance our International strategy.

Lockheed Martin was awarded a prototype agreement to partner with the U S Army and serve as a team lead to develop a data centric and GCT prototype.

Speaker #3: For example, of these strategic enhancements could include advanced and expanded weapons compatibility, improved data links, autonomous drone wingman integration, superior sensors, and the latest electronic warfare capabilities.

<unk> will spearhead the collaborative effort leveraging our <unk> systems engineering and project management expertise to empower non traditional innovators and commercial technology providers to scale their capabilities into our <unk> offering.

The global mobile artillery rocket system or gmar program completed a major Milestone launching 2. Glo rounds at a live fire event at a White Sands Missile Range. Validating the launchers performance and ability to integrate the mlrs family, Munitions or Hmong.

The global mobile artillery rocket system or gmar program completed a major Milestone launching 2. Jail minutes rounds at a live fire event at a White Sands Missile Range. Validating the launchers performance and ability to integrate the mlrs family, Munitions or Hmong.

Speaker #3: Now turning to the budget, we're all watching Congress work through the FY26 appropriation bills and the government shutdown. We continue to see broad support through all of this for national defense priorities, given the unsettled geopolitical situation.

This successful test demonstrates, lockyard ability to adapt to Regional needs in Europe and partnered to create something new, our Precision fires launcher that is interoperable with NATO assets.

This successful test demonstrates Lockheed Martin's ability to adapt to regional needs in Europe and partnered to create something new: our Precision Fires Launcher that is interoperable with NATO assets.

Finally space performed very well in the quarter meeting key milestones on SPM classified national security space.

We expect programs like GMARS to support the long-term international growth. We anticipate, within MFC and across the broader portfolio, through the end of the decade.

Weeks. But programs, like, gmars to support the long-term International growth. We anticipate within MFC and across the broader portfolio through the end of the decade.

<unk> and GPS III.

On GPS the ninth vehicle was transported to keep <unk> at the end of September.

Moving to RMS and building upon. Jim's comments. Regarding our work at the center for Innovation related to golden dome.

Moving to RMS and building upon Jim's comments regarding our work at the Center for Innovation related to the Golden Dome.

More recently Lockheed Martin delivered our first of 21 vehicles per space development agencies transport layer tranche one program <unk>.

Another growth prospect in the integrated and scalable C2 domain is the Next Generation Command and Control, or NGC, program.

Successful program execution events like these have helped space once again delivered strong profit in the quarter, resulting in segment margins of nine 9%.

Okim Martin was awarded a prototype agreement to partner with the US Army and serve as a team lead to develop a data-centric. NGC prototype.

Aim Martin was awarded a prototype agreement to partner with the US Army and serve as a team lead to develop a data Centric. NGC prototype.

I'll now turn it over to Maria.

Thanks, Kevin.

Starting with Aeronautics on chart five third quarter sales at <unk> increased 12% year over year to $7 3 billion.

RS will spearhead the collaborative effort leveraging. Our C2 systems engineering and project management expertise to empower non-traditional innovators and Commercial technology providers to scale their capabilities into our NGC 2 offering.

RMS will spearhead the collaborative effort, leveraging our C2 systems and engineering and project management expertise to empower non-traditional innovators and commercial technology providers to scale their capabilities into our NGC 2 offering.

The increase was primarily due to higher volume on F 35 production and Sustainment contracts as well as the absence of the $700 million impact of lot 18, 19 contracted lease in last year's third quarter.

Finally space performed very well in the quarter meeting key Milestones on fbm Class by National Security, space opir and cps3.

Finally, Space performed very well in the quarter, meeting key milestones on FBM, classified national security, Space OPIR, and GPES-3.

The increase was partially offset by lower volume at classified programs.

On GPS, the 9th vehicle was transported to Cape Canaveral at the end of September.

On GPS, the ninth vehicle was transported to Cape Canaveral at the end of September.

<unk> for last year's $18 19 award timing impact sales at Arrow would have increased 1%.

For space development agencies transport layer. Tranche 1 program.

And more recently, Lockheed Martin delivered our first of 21 vehicles for the Space Development Agency's Transport Layer Tranche 1 program.

Segment operating profit increased 3% year over year in the third quarter to $682 million the benefit of the profit on the higher volume was partially offset by lower profit booking rate adjustments, which included an unfavorable adjustment of $40 million on C 130 programs this quarter.

Successful program, execution, events. Like these have helped space once again deliver strong profit in the quarter. Resulting in segments margins of 9.9%.

Successful program, execution, events. Like these have helped space once again deliver strong profit in the quarter. Resulting in segments margins of 9.9%.

I now turn it over to Maria.

I'll now turn it over to Maria.

Thanks Evan.

Thanks Evan.

Starting with Aeronautics on Chart 5.

Okay, starting with Aeronautics on chart 5.

third quarter sales at

12%.

Yeah.

The photo to the rate showcases Lockheed Martin vector group's size survivable and lethal collaborative combat aircraft with a highly capable customizable and affordable agile drone framework.

Third quarter sales at Arrow increased 12% year-over-year to 7.3 billion. The increase was primarily due to higher volume on F-35 production and sustainment contracts. As well as the absence of the 700 million impact of lot, 1819 contract, delays in last year's third quarter,

Year-over-year to 7.3 billion. The increase was primarily due to higher volume on F-35 production and sustainment contracts. As well as the absence of the 700 million impact of lot, 1819 contract, delays in last year's third quarter,

Similar to the common multi mission shrunk. This is another example of Lockheed Martin internally funding development of advanced technology. In this case to create autonomous air dominant force multipliers to help customers outpace threat.

the increase was partially offset by lower volume at classified programs. Adjusting for last year's lot 18/19 award timing impact sales at Arrow would have increased 1%

the increase was partially offset by lower volume at classified programs. Adjusting for last year's lot 1819 award timing impact sales at Arrow would have increased 1%

Turning to missiles and fire control on chart six.

Segment operating profit increased 3% year-over-year in the third quarter to 682 million.

Segment operating profit increased 3% year-over-year in the third quarter to 682 million.

Sales at MFC in the quarter increased 14% from the prior year Q3 6 billion.

Driven by higher volume Q2 production ramps, including for multiple tactical and strike missile programs, such as Jonathan the RASM in prison as well as for integrated Air and missile defense programs, primarily Pac three.

The benefit of the profit on the higher volume was partially offset by lower profit booking rate adjustments, which included an unfavorable adjustment of 40 million dollars on C130 programs this quarter.

The benefit of the profit on the higher volume was partially offset by lower profit booking rate adjustments, which included an unfavorable adjustment of $40 million on C130 programs this quarter.

<unk> III picture to the rate continues to ramp production with the program eclipsing $2 billion in sales year to date, which is 18% higher than last year.

The photo to the right showcases Lockheed Martin vectis, a group 5, survival and lethal collaborative, combat aircraft with a highly capable customizable and affordable agile. Drone framework.

The photo to the right showcases Lockheed Martin Vectis, a Group 5, survival and lethal collaborative combat aircraft with a highly capable, customizable, and affordable agile drone framework.

Segment operating profit in Q3 improved by 12% year over year to $510 million driven by the profit associated with the higher volume.

Shifting to rotary and mission systems on chart seven.

Sales in RMS were comparable year over year in the quarter at $4 4 billion.

Primarily driven by higher volumes on Sikorsky Blackhawk and various <unk> ISR programs.

These increases were mostly offset by lower volume and integrated warfare systems, and sensors and various training logistics and simulation programs.

Operating profit at RMS increased 5% in the third quarter versus prior year, primarily due to favorable contract mix at Sikorsky.

The photo here is that our Sikorsky CH 53, K King stallion, which as previously mentioned received the largest award enormous history during the third quarter.

And on chart eight we will conclude the business area of discussion with speed.

Base sales increased 9% year over year in the third quarter due to higher volumes at strategic and missile defense, driven by SPM and Gi programs as well as that National security space.

FBL picture to the rate continues to benefit from the life extension Q activities with sales up 14% year to date and driving accretive growth for the space segment.

Speaker #1: Training logistics and simulation programs. Operating profit at RMS increased 5% in the third quarter versus prior year. Primarily due to favorable contract mix at Sikorsky.

Maria Ricciardone: Curious training logistics and simulation programs. Operating profit at RMS increased 5% in the third quarter versus prior year, primarily due to favorable contract mix at Sikorsky. The photo here is of a Sikorsky CH-53K King Stallion, which, as previously mentioned, received the largest award in RMS history during the third quarter. On chart eight, we'll conclude the business area discussion with space. Space sales increased 9% year over year in the third quarter due to higher volumes at strategic and missile defense, driven by FBM and NGI programs, as well as at national security space. FBM, pictured to the right, continues to benefit from the life extension II activities, with sales up 14% year to date and driving accretive growth for the space segment. Space operating profit increased 22% compared to Q3 2024.

<unk> operating profit increased 22% compared to Q3 2024.

Speaker #1: The photo here is of a Sikorsky CH-53K King Stallion, which, as previously mentioned, received the largest award in RMS history during the third quarter.

This increase was driven by favorable net profit booking rate adjustments, primarily on SPM as well as profit associated with the higher sales volumes.

Speaker #1: And on Chart Eight, we'll conclude the business area discussion with Space. Space sales increased 9% year-over-year in the third quarter, due to higher volumes at Strategic and Missile Defense, driven by the FBM and NGI programs.

Equity earnings from United Launch Alliance USA were essentially flat versus prior year.

Now I'll turn it back over to Eddie.

Thank you Maria turning to chart nine and our outlook for 2025 as we approach year end, we refined our estimates to reflect increased expectations for sales segment operating profit and earnings per share as well as clarifying our attentions on free cash flow and deployment activities.

Speaker #1: As well as at National Security Space. FBM, pictured to the right, continues to benefit from the Life Extension II activities. With sales up 14% year-to-date, and driving a creative growth for the space segment.

Building off a solid year to date growth, we're tightening the sales guidance range to $74 25 billion to $74 75 billion.

Speaker #1: Space operating profit increased 22% compared to Q3 2024. This increase was driven by favorable net profit booking rate adjustments, primarily on FBM, as well as profit associated with the higher sales volumes.

Up $250 million at the midpoint, and implying 5% organic growth year over year.

Maria Ricciardone: This increase was driven by favorable net profit booking rate adjustments, primarily on FBM, as well as profit associated with the higher sales volumes. Equity earnings from United Launch Alliance, ULA, were essentially flat versus prior year. Now I'll turn it back over to Evan.

We now expect segment operating profit to be in the range of $6.

Speaker #1: Equity earnings from United Launch Alliance (ULA) were essentially flat versus the prior year. Now, I'll turn it back over to Evan.

Six seven or $6 75 to $6 $75 billion, maintaining a mid point margin of 9%.

Speaker #2: Thank you, Maria. Turning to Chart 9 and our outlook for 2025. As we approach year-end, we've refined our estimates to reflect increased expectations for sales, segment operating profit, and earnings per share, as well as clarifying our intentions on free cash flow and deployment activities.

Business every detail can be found on chart 14, and backup appendix too, but I'll touch on it briefly now.

Evan Scott: Thank you, Maria. Turning to chart nine and our outlook for 2025. As we approach year end, we've refined our estimates to reflect increased expectations for sales, segment operating profit, and earnings per share, as well as clarifying our intentions on free cash flow and deployment activities. Building off the solid year-to-date growth, we're tightening the sales guidance range to $74.25 billion to $74.75 billion, up $250 million at the midpoint, and implying 5% organic growth year over year. We now expect segment operating profit to be in the range of $6.675 billion to $6.725 billion, maintaining a midpoint margin of 9%. Business area detail can be found on chart 14 and backup appendix two, but I'll touch on it briefly now.

Three of the four business areas Arrow MFC and space are increasing their outlooks for sales by a combined $750 million largely based on solid year to date performance and improved clarity on cost timing production ramps and throughput expectations in Q4.

Speaker #2: Building off the solid year-to-date growth, we're tightening the sales guidance range to 74.25 billion dollars to 74.75 billion dollars, up 250 million dollars at the midpoint, and implying 5% organic growth year-over-year.

Meanwhile, RMS is lowering its forecast for sales by $500 million.

Due to lower expected cost volume and slower production ramps at Sikorsky.

Speaker #2: We now expect segment operating profit to be in the range of $6.675 to $6.725 billion dollars, maintaining a midpoint margin of 9%. Business area detail can be found on chart fourteen, and backup appendix two.

What changes are generally in line with sales.

Back to the company level on earnings per share, we are increasing our estimate to a range of $22 15 to.

To $22 35.

Incorporating the $50 million of incremental segment, Mark operating profit as well as lower estimated full year tax rate.

Speaker #2: But I'll touch on it briefly now. Three of the four business areas—Aero, MSC, and Space—are increasing their outlooks for sales by a combined $750 million.

Evan Scott: Three of the four business areas, Aero, MFC, and Space, are increasing their outlooks for sales by a combined $750 million, largely based on solid year-to-date performance and improved clarity on cost timing, production ramps, and throughput expectations in Q4. Meanwhile, RMS is lowering its forecast for sales by $500 million due to lower expected cost volume and slower production ramps at Sikorsky. Profit changes are generally in line with sales. Back to the company level, on earnings per share, we are increasing our estimate to a range of $22.15 to $22.35, incorporating the $50 million of incremental segment operating profit, as well as lower estimated full-year tax rate, now estimated to be approximately 16.7%. As our release stated, the EPS outlook excludes any non-cash impacts from the conversion of pension annuity contracts that are currently under evaluation and could occur as early as the fourth quarter.

Now estimated to be approximately 16, 7%.

And as our release stated the EPS outlook excludes any non cash impacts from the conversion of pension annuity contracts that are currently under evaluation and could occur as early as the fourth quarter.

Speaker #2: Largely based on solid year-to-date performance, and improved clarity on cost timing, production ramps, and throughput expectations in Q4. Meanwhile, RMS is lowering its forecast for sales, by 500 million dollars, due to lower expected cost volume and slower production ramps at Sikorsky.

Turning to cash we shifted to a point estimate for our cash flow guidance. This quarter. We have line of sight to solid cash generation through the end of the year and we intend to direct any incremental cash generated above the $6 $6 billion free cash flow estimate for 2025 towards pre funding portion of the.

Speaker #2: Profit changes are generally in line with sales. Back to the company level, on earnings per share, we are increasing our estimate to a range of $22.15 to $22.35, incorporating the $50 million of incremental segment mark operating profit, as well as a lower estimated full-year tax rate.

<unk> $1 billion pension contribution in 2026.

Our goal is to build financial flexibility in 2026 and beyond to ensure we are best positioned to seize organic growth opportunities and create value for shareholders.

Speaker #2: Now estimated to be approximately 16.7%. As our release stated, the EPS outlook excludes any non-cash impacts from the conversion of pension annuity contracts that are currently under evaluation and could occur as early as the fourth quarter.

In summary on chart 10, as Jim said, we're excited about the prospects for Lockheed Martin we remain laser focused on executing our record backlog to deliver on our program commitments and drive favorable outcomes that create value for our customers and shareholders.

Speaker #2: Turning to cash, we've shifted to a point estimate for our cash flow guidance this quarter. We have line of sight to solid cash generation through the end of the year, and we intend to direct any incremental cash generated above the 6.6 billion dollars free cash flow estimate for 2025 towards pre-funding a portion of the required $1 billion dollar pension contribution in 2026.

Evan Scott: Turning to cash, we've shifted to a point estimate for our cash flow guidance this quarter. We have line of sight to solid cash generation through the end of the year, and we intend to direct any incremental cash generated above the $6.6 billion free cash flow estimate for 2025 towards pre-funding a portion of the required $1 billion pension contribution in 2026. Our goal is to build financial flexibility in 2026 and beyond to ensure we are best positioned to seize organic growth opportunities and create value for shareholders. In summary, on chart 10, as Jim said, we're excited about the prospects for Lockheed Martin. We remain laser-focused on executing our record backlog to deliver on program commitments and drive favorable outcomes that create value for our customers and shareholders. With that, Sarah, let's open up the call for Q&A.

With that Sarah let's open up the call for Q&A.

Thank you if you wish to ask a question. Please press Star then one on your Touchtone phone.

And then Peter indicating you have been placed in Q you may remove yourself from the queue at any time by pressing Star then one again.

We ask that you please limit yourself to one question.

Speaker #2: Our goal is to build financial flexibility in 2026 and beyond to ensure we are best positioned to seize organic growth opportunities and create value for shareholders.

Youre using a speakerphone, please pick up the handset before pressing the numbers.

Once again, if you have a question. It is star then one at this time.

Your first question comes from Doug Harned with Bernstein. Your line is open.

Speaker #2: In summary, on chart ten, as Jim said, we're excited about the prospects for Lockheed Martin. We remain laser-focused on executing our record backlog to deliver on program commitments and drive favorable outcomes, that create value for our customers, and shareholders.

Good morning, Thank you.

Jim when you look at this quarter this quarter margins were good essentially a clean quarter.

Speaker #2: With that, Sarah, let's open up the call for Q&A.

And when you look back over the past year, though and certainly in the last quarter.

Speaker #3: Thank you. If you wish to ask a question, please press star, then one on your touchtone phone. You will hear an annunciator indicating you have been placed in queue.

Operator: Thank you. If you wish to ask a question, please press star, then one on your touch-tone phone. You will hear an annunciator indicating you have been placed in queue. You may remove yourself from the queue at any time by pressing star, then one again. We ask that you please limit yourself to one question. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, it is star, then one at this time. Your first question comes from Doug Harnett with Bernstein. Your line is open.

<unk> had some charges fixed price development program issues in MFC and <unk>.

Aeronautics in Rms.

Speaker #3: You may remove yourself from the queue at any time by pressing star then one again. We ask that you please limit yourself to one question.

How do you look at the when you look forward now how do we get comfortable that those issues are behind you. What have you done across those businesses. So we can get pretty confident that this growth trajectory can be executed with strong margin performance.

Speaker #3: If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, it is star then one at this time.

Speaker #3: Your first question comes from Doug Harnid with Bernstein. Your line is open.

Yes, Doug good morning.

<unk>.

Taken our best approach, our best people and we've put them on these highlight programs, which have been if you've been reading the accusing case for the last 10 years, they've been highlighted all the way through and we're at a point where now our growth prospects are so strong that.

Speaker #4: Good morning, thank you. You know, Jim, when you look at this quarter, the margins were good, and essentially it was a clean quarter. However, when you look back over the past year, and certainly last quarter, you've had some charges related to fixed-price development program issues, MSC, Aeronautics, and RMS.

[Analyst 1]: Good morning. Thank you. Jim, when you look at this quarter, this quarter margins were good, essentially a clean quarter. When you look back over the past year, though, and certainly, you know, last quarter, you've had some charges, fixed price development program issues, and MFC and Aeronautics in RMS. How do you look at the, when you look forward now, how do we get comfortable that those issues are behind you? What have you done across those businesses so we can get pretty confident that this growth trajectory can be executed with strong margin performance?

We just wanted to try to put every risk that we can quantify behind us in the company.

Speaker #4: You know, how do you look at the, when you look forward now, you know, how do we get comfortable that those issues are behind you?

Now, we can't predict 100% that we've covered every risk and every flight test is going to be successful et cetera.

Speaker #4: What have you done across those businesses so we can get pretty confident that this growth trajectory can be executed with strong margin performance?

But we've really wanted to take the lion's share of the risk.

Put it in place cover it.

Take the charges and move on that's the attitude again can't guarantee perfection going forward.

Speaker #5: Yeah, Doug, good morning. Look, we've taken our best approach, our best people, and we've put them on these highlight programs, which have been, you know, if you've been reading the Qs and Ks for the last ten years, they've been highlighted all the way through.

James Taiclet: Yeah, Doug, good morning. Look, we've taken our best approach, our best people, and we've put them on these highlight programs, which have been, you know, if you've been reading the Qs and Ks for the last 10 years, they've been highlighted all the way through. We're at a point where now our growth prospects are so strong that we just want to try to put every risk that we can quantify behind us in the company. We can't predict 100% that we've covered every risk, that every flight test is going to be successful, et cetera. We've really wanted to take the lion's share of the risk, put it in place, cover it, take the charges, and move on. That's the attitude. Can't guarantee perfection going forward, but that's been our attitude.

That's been our attitude and instead of light lugging These rocks behind us every quarter.

Once we knew about the helicopter programs, both of which could still do better than we're expecting.

Speaker #5: And we're at a point where now our growth prospects are so strong that we just want to try to put every risk that we can, quantify behind us in the company.

We just wanted to take those two legacy risks off the table.

And then when it came to MFC that program needed to get past certain test points. If you will it's gotten past them, we have a lot more confidence in that and we took the charges we did because.

Speaker #5: Now, we can't predict 100% that we've covered every risk, that every flight test is going to be successful, et cetera. But we've really wanted to take the lion's share of the risk, put it in place, cover it, take the charges, and move on.

That risk had been carried all those years and then finally on the Aero classified.

We have basically.

Ground that program and talent and attention.

Speaker #5: That's the attitude. Again, can't guarantee perfection going forward, but that's been our attitude and instead of, like, lugging these rocks behind us every quarter, the ones we knew about, you know, the helicopter programs, both of which could still do better than we're expecting, but we just wanted to take those two legacy risks off the table, and then when it came to MSC, that program needed to get past certain test points, if you will, it's gotten past them.

We've got our chief engineer for the entire company now base.

Basically the project engineer.

James Taiclet: Instead of lugging these rocks behind us every quarter, the ones we knew about, you know, the helicopter programs, both of which could still do better than we're expecting, we just wanted to take those two legacy risks off the table. When it came to MSC, that program needed to get past certain test points, if you will. It's gotten past them. We have a lot more confidence in that. We took the charges we did because that risk had been carried all those years. Finally, on the AERO classified, we have basically drowned that program in talent and attention. We've got our Chief Engineer for the entire company now, basically the Project Engineer on the P958 program, along with a lot of other talent too. We rebaselined every single original assumption in that bid from 2018. We think we've covered most of the bases that we can understand.

On <unk> on the <unk> program.

Along with a lot of other talent too. So again, we've re baseline every single original assumption in that bid from 2018, and we think we've covered most of the basis that we can understand.

But there are still technical risk in this.

And what will come out the other side.

Speaker #5: We have a lot more confidence in that, and we took the charges we did because you know, that risk had been carried all those years.

Is something really amazing that we'll have lots more demand, we think beyond the fixed price production lots that we are taking the charges for so I do see.

Speaker #5: And then finally, on the Aero classified, we have basically drowned that program in talent and attention. We've got, you know, our Chief Engineer for the entire company now basically the project engineer on the P95A program, along with a lot of other talent too.

<unk>.

A much more robust future for that program now that we've taken those charges again put that all behind us, but it is not.

100% risk free, let's say, but I think in the end all in all and I have been on top of all of these programs myself too at a detailed level. This will be very good for the company and very good for the country over the over the next number of years.

Speaker #5: So, again, we rebaselined every single original assumption in that bid from 2018, and we think we've covered most of the bases that we can understand.

The next question comes from Seth <unk> with J P. Morgan Your line is open.

Speaker #5: But there's still technical risk in this, and what will come out the other side is something really amazing that will have lots more demand, we think, beyond the fixed-price production lots that we are taking the charges for.

James Taiclet: There's still technical risk in this. What will come out the other side is something really amazing that will have lots more demand, we think, beyond the fixed price production lots that we are taking the charges for. I do see a much more robust future for that program now that we've taken those charges and put that all behind us. It's not 100% risk-free, let's say. I think in the end, all in all, and I've been on top of all these programs myself too, at a detailed level, this will be very good for the company and very good for the country over the next number of years.

Hey, thanks, very much and good morning.

Even in the past on the on the Q3 call. The company has provided.

Color on expectations for the following year I don't know if theres there.

Speaker #5: So, I do see, a much more robust future for that program. Now that we've taken those charges, and again, put that all behind us.

Anything you can say at this time, but given the backlog growth would there be any reason not to expect mid single digit growth next year and also if you can any anything you can say about the mix and margin profile along with the cash flow outlook for 2026 that you talked about on the last quarterly call and whether that's still.

Speaker #5: But it's not, you know, 100%, risk-free, let's say. But I think in the end, all in all, and I've been on top of all these programs myself too, at a detailed level, this will be very good for the company and very good for the country, over the over the next number of years.

The way to look at thanks.

Yes.

Thanks for the question Seth So we are not changing our trending that we previously provided but since we provided that trending we are seeing some new opportunities emerge, particularly around the munitions and golden dome and some others across the portfolio.

Speaker #3: The next question comes from Seth Seifman with JP Morgan. Your line is open.

Operator: The next question comes from Seth Seifman with JP Morgan. Your line is open.

Speaker #6: Hey, thanks very much, and and good morning. Evan in in the past on the on the Q3 call, the company has provided, you know, some color on expectations for the following year.

[Analyst 2]: Hey, thanks very much. Good morning. Evan, in the past on the Q3 call, the company has provided some color on expectations for the following year. I don't know if there's anything you can say at this time, but you know, given the backlog growth, would there be any reason not to expect mid-single-digit growth next year? Also, if you can, anything you can say about the mix and margin profile along with the cash flow outlook for 2026 that you talked about on the last quarter of the call and whether that's still the way to look at things.

Given that these items are fluid, we're going to continue to focus on them. This quarter, specifically and we'll be in a much better position to give clear guidance on that in January both on what upside to revenue that might drive.

Speaker #6: I don't know if there's anything you can say at this time, but, you know, given the backlog growth, would there be any reason not to expect mid-single-digit growth next year?

The investments that are required to unlock that revenue.

Speaker #6: And, you know, also, if you can, anything you can say about the mix and margin profile, along with the cash flow outlook for 2026 that you talked about on the last quarter of the call, and whether that's still the way to look at things.

The next question comes from Ken Herbert with RBC capital markets. Your line is open.

Yeah, Hi, Jim Thanks for the question.

MFC revenues, you've seen really strong growth now for several quarters as you think about the outlook for sort of a high single low double outlook over the next few years.

Speaker #2: Thanks for the question, Seth. . So, we are not changing our trending that we previously provided, but since we provided that trending, we are seeing some new opportunity emerge.

Evan Scott: Thanks for the question, Seth. We are not changing our trending that we previously provided, but since we provided that trending, we are seeing some new opportunity emerge, particularly around the munitions and Golden Dome and some other areas across the portfolio. Given that these items are fluid, we're going to continue to focus on them this quarter specifically, and we'll be in a much better position to give clear guidance on that in January, both on what upside to revenue that might drive and any investments that are required to unlock that revenue.

With the very strong demand signals, we continue to pull out point out could you talk about confidence in the supply chain to ramp production over the next few years, whether it be.

Speaker #2: particularly around the munitions and and gold and dome, and some other areas across the portfolio. given that these items are fluid, we're going to continue to focus on them this quarter specifically, and we'll be in a much better position to give clear guidance on that in January, both on what upside to revenue that might drive, and any investments that are required to unlock that revenue.

Solid rocket motors seekers any other focus areas that are constraints today or that you see as potential risks as you look at obviously executing to some of the major contracts you've announced.

Yeah, Hey, Ken it's Jim.

<unk> worked with our U S government partners and our key suppliers on especially some of those items that you just pointed to.

Speaker #3: The next question comes from Ken Herbert with RBC Capital Markets. Your line is open.

Operator: The next question comes from Ken Herbert with RBC Capital Markets. Your line is open.

Much more confident today than I was a year or so ago about the ability of those industry partners.

Speaker #7: Yeah, hi. Jim and Evan, thanks for the question. You know, MSC revenues have seen really strong growth now for several quarters. As you think about the outlook for a high single to low double-digit growth over the next few years, with the very strong demand signals you continue to point out, could you talk about confidence in the supply chain to ramp production over the next few years? Whether it be solid rocket motors, seekers, or any other focus areas that are constraints today or that you see as potential risks, as you look at obviously executing to some of the major contracts you've announced?

Jay Malave: Yeah, hi, Jim and Evan, thanks for the question. You know, MFC revenues, you've seen really strong growth now for several quarters. As you think about the outlook for sort of the high single, low double outlook over the next few years, with the very strong demand signals you continue to point out, could you talk about confidence in the supply chain to ramp production over the next few years, whether it be solid rocket motors, seekers, any other focus areas that are constraints today or that you see as potential risks as you look at obviously executing to some of the major contracts you've announced?

To step up to the kinds of rates of production increase that we're being asked to put it into play.

There has been I would say top level interest in both the secret provider.

And commitment to the government into into us to make the kind of investments that will give us confidence that they will get there.

On the on the solid rocket motor side, we've got really three providers now Eric.

Speaker #5: Yeah, hey, Ken, it's Jim. We've worked with our U.S. government partners and our key suppliers on especially some of those items that you just pointed to.

Aerojet Rocketdyne, which has also stepped up with investment Northrop Grumman made a big commitment again to investment on the SRM and we've got a joint venture now with general dynamics, where we will have the ability to have a third supplier to bolster those too in the future so much.

James Taiclet: Yeah, hey Ken, it's Jim. We've worked with our U.S. government partners and our key suppliers on especially some of those items that you just pointed to. I'm much more confident today than I was a year or so ago about the ability of those industry partners to step up to the kinds of rates of production increase that we're being asked to put into play. There's been, I would say, top-level interest in both the seeker provider and commitment to the government and to us to make the kind of investments that will give us confidence that they will get there. On the solid rocket motor side, we've got really three providers now. Aerojet Rocketdyne, which has also stepped up with investment. Northrop Grumman made a big commitment again to investment on the solid rocket motors.

Speaker #5: And I'm much more confident today than I was a year or so ago, about the ability of those industry partners to step up to the kinds of rates of production increase that we're being asked to put into play.

More confident about supply chain and that was before having said that there are a lot of parts and components and these devices and we have to manage it every day.

Speaker #5: there's been I would say top-level interest in both the seeker provider and commitment to the government and to us to make the kind of investments that will give us confidence that they will get there.

A wet blanket, we're all on top of our suppliers and we're getting better and better at looking farther ahead to see whether the issues might come and address some early.

Speaker #5: On the solid rocket motor side, we have three providers now: Aerojet Rocketdyne, which has also stepped up with investment; Northrop Grumman, which made a big commitment to investment in the SRMs.

Yes, and I think I'll just add to.

To reach a level of scale, that's being contemplated it really will take everybody operating the same direction as Jim said every single part needs to be on time and that is going to take close coordination with our customer and I think we're going to get exactly that to scale across the entire supply chain because the goal is not only to meet current delivery requirements, which we're very focused.

Speaker #5: And we've got a joint venture now with General Dynamics, where we will have the ability to have a third supplier to bolster those two in the future.

James Taiclet: We've got a joint venture now with General Dynamics where we will have the ability to have a third supplier to bolster those two in the future. I'm much more confident about supply chain than I was before. Having said that, there are a lot of parts and components in these devices, and we have to manage it every day like a wet blanket. We're all on top of our suppliers, and we're getting better and better at looking farther ahead to see where the issues might come and address them early.

<unk>, but to potentially scale beyond that to customers demand and then have resiliency within the supply chain that being able to scale further as needed and that's our big focus as we work on that this quarter.

Speaker #5: So, I'm much more confident about supply chain than I was before. Having said that, there are a lot of parts and components in these devices, and we have to manage it every day, like a wet blanket.

Yeah.

Speaker #5: We're all on top of our suppliers, and we're getting better and better at looking farther ahead to see where the issues might come and address them early.

The next question comes from Gavin Parsons of UBS. Your line is open.

Thank you good morning.

Speaker #2: Yeah, and I think I'll just add that to reach a level of scale that's being contemplated, it really will take everybody operating in the same direction.

Good morning good.

Evan Scott: I think I'll just add, to reach a level of scale that's being contemplated, it really will take everybody operating the same direction. As Jim said, every single part needs to be on time, and that is going to take close coordination with our customer. I think we're going to get exactly that to scale across the entire supply chain because the goal is not only to meet current delivery requirements, which we're very focused on, but to potentially scale beyond that to customers' demand and then have resiliency within those supply chains to be able to scale further as needed. That's our big focus as we work on that this quarter.

Morning.

Thinking a little bit further about the capacity investment and Capex spend over the past few years has pretty consistently been around two 5% of revenue and you've grown kind of mid single digits is there a way to quantify what say 100 basis point step up in Capex would convert to in terms of revenue growth or how do you guys think about it.

Speaker #2: As Jim said, every single part needs to be on time. And that is going to take close coordination with our customer. And I think we're going to get exactly that, to scale across the entire supply chain, because the goal is not only to meet current delivery requirements, which we're very focused on, but to potentially scale beyond that to customers' demand.

I think it's a little early to make that direct correlation I will say that the numbers you've stated historically probably hold for the future based on the revenue projections. We had given previously in terms of trending to the extent that there is a significant ramp up to that demand and top line there will.

Speaker #2: And then we have resiliency within those supply chains to be able to scale further as needed. That's our big focus as we work on that this quarter.

Speaker #3: The next question comes from Gavin Parsons of UBS. Your line is open.

Operator: The next question comes from Gavin Parsons of UBS. Your line is open.

Potentially more capital investment than we have maybe seen historically to unlock that.

Speaker #7: Thank you. Morning.

Jay Malave: Thank you. Good morning.

Speaker #8: Morning.

Evan Scott: Morning.

Speaker #5: Morning.

Jay Malave: Morning.

Given the potential scale of the initial ramps that we're talking about and that will be able to give a much better clarity on when we report in January.

Speaker #7: Thinking a little bit further about the capacity investment in CapEx spend, you know, over the past few years, it's pretty consistently been around 2.5% of revenue, and you've grown kind of mid-single digits.

Evan Scott: Thinking a little bit further about the capacity investment and CapEx spend, over the past few years, it's pretty consistently been around 2.5% of revenue, and you've grown kind of mid-single digits. Is there a way to quantify what, say, 100 basis points step up in CapEx would convert to in terms of revenue growth, or how do you guys think about it?

Okay.

Speaker #7: Is there a way to quantify, you know, what, say, you know, 100 basis points step up in CapEx would convert to in terms of revenue growth, or how do you guys think about it?

The next question comes from Scott <unk> of Deutsche Bank. Your line is open.

Hey, good morning, Evan for the guidance reduction in RMS is at CH 53, K volume at Sikorsky Thats trending lower than expected orders at Blackhawk.

Speaker #2: I think it's a little early to make that direct correlation. I will say that the numbers you've stated historically probably hold for the future based on the revenue projections we had given previously in terms of trending.

Jay Malave: I think it's a little early to make that direct correlation. I will say that the numbers you stated historically probably hold for the future based on the revenue projections we had given previously in terms of trending. To the extent that there is a significant ramp-up to that demand and top line, there will be potentially more capital investment than we have maybe seen historically to unlock that, given the potential scale of the munitions ramps that we're talking about. That will be able to give much better clarity on when we report in January.

And then what do you expect any of this year's pressure to get caught up next year such that you ultimately.

Get better growth in RMS snack RMS next year, Atlanta, and kind of the same spot. Thank you.

Speaker #2: To the extent that there is a significant ramp-up to that demand and topline, there will be potentially more capital investment than we have maybe seen historically to unlock that.

CH 53, K is the largest driver as we work to scale production.

We have seen some strength in Blackhawk, this particular quarter compared to last quarter, So fourth quarter needs to continue to be a scaling quarter for us and then next year for sure across both programs. So our intention is to get production scaled in a good shape next year and we'll be talking about that of course more specifically.

Speaker #2: Given the potential scale of the munition ramps that we're talking about, that will be able to give a much better clarity on when we report in January.

Speaker #3: The next question comes from Scott Duchell of Deutsche Bank. Your line is open.

Operator: The next question comes from Scott Duschel of Deutsche Bank. Your line is open.

In January but in terms of main drivers. This year I think you are thinking about it right now.

Speaker #6: Hey, good morning. Evan, for the guidance reduction at RMS, is it the CH-53K volume at Sikorsky that's trending lower than expected, or is it Blackhawk?

[Analyst 2]: Hey, good morning. Evan, for the guidance reduction at RMS, is it CH-53K volume at Sikorsky that's trending lower than expected, or is it Black Hawk? Would you expect any of this year's pressure to get caught up next year, such that you ultimately, you know, get better growth at RMS next year and land in kind of the same spot? Thank you.

Scott. This is Jim there's one thing that I've been pushing for a few years and it's starting to get traction on the customer side now which is autonomous Blackhawk.

Speaker #6: And then would you expect any of this year's pressure to get caught up next year, such that you ultimately you know get better growth at RMS next year and land in kind of the same spot?

For contest of logistics and Eric.

Evacuation missions those kinds of things.

Speaker #6: Thank you.

Where we can repurpose blackhawks over the next couple of decades.

Speaker #2: CH-53K is the largest driver, as we work to scale production we have seen some strength in Blackhawk this particular quarter compared to last quarter.

Evan Scott: CH-53K is the largest driver as we work to scale production. We have seen some strength in Black Hawk this particular quarter compared to last quarter. The fourth quarter needs to continue to be a scaling quarter for us, and next year for sure across both programs. Our intention is to get production scaled and in good shape next year. We'll be talking about that, of course, more specifically in January. In terms of main drivers this year, I think you are thinking about it right.

About a $5 million per unit autonomy package that can free you up from pilot risk and also from pilot demand on pilots and keep those pilots available for.

Speaker #2: So, fourth quarter needs to continue to be a scaling quarter for us, and then next year for sure. Across both programs. So, our intention is to get production scaled and in good shape next year, and we'll be talking about that, of course, more specifically in January.

Critical missions that they have to be in the cockpit four so basically it's a pilot optional Blackhawk we've demonstrated these.

For the last two three years.

Speaker #2: But in terms of main drivers this year, I think you are thinking about it right.

There will be some interest in and the armed forces on those because they can to test the logistics environment is getting way worse instead of <unk>.

Speaker #5: Yeah, this is Scott, this is Jim. There's one thing that I've been pushing for a few years, and it's starting to get traction on the customer side now, which is autonomous Blackhawk.

James Taiclet: Yeah, this is Scott. This is Jim. There's one thing that I've been pushing for a few years, and it's starting to get traction on the customer side now, which is autonomous Black Hawk for contested logistics and air evacuation missions, those kinds of things, where we can repurpose Black Hawks over the next couple of decades with about a $5 million per unit autonomy package that can free you up from pilot risk and also from demand on pilots and keep those pilots available for the critical missions that they have to be in the cockpit for. Basically, it's a pilot optional Black Hawk. We've demonstrated these for the last two, three years. I think there'll be some interest in the armed forces on those because the contested logistics environment is getting way worse instead of any better.

Any better.

Yeah.

Speaker #5: For contested logistics and air evacuation missions, those kinds of things. Where we could repurpose Blackhawks over the next couple of decades with about a $5 million per unit autonomy package.

The next question comes from Rich Safran with Seaport Research partners. Your line is open.

Jim had been Marie and good morning.

And then if I may I wanted to follow up on your opening pension remarks, when we spoke in August I brought up pension offsets.

Speaker #5: That can free you up from pilot risk and also from pilot demand on pilots, and keep those pilots available for the critical missions that they have to be in the cockpit for.

While you Werent specific you did seem to indicate there were some options.

Speaker #5: So, basically, it's a pilot optional Blackhawk. We've demonstrated these for the last two, three years. And I think there'll be some interest in the armed forces on those, because the contested logistics environment is getting way worse instead of any better.

For offsetting pension headwinds now I understand your comments about 25 cash flow impact of pension offsets, but could you discuss your plans in a bit more detail and tell us if there is.

Anything else being contemplated that could offset 26 or 27 free cash flow headwinds from pension.

<unk>.

Sure thing rich.

Speaker #3: The next question comes from Rich Safran with Seaport Research Partners. Your line is open.

Operator: The next question comes from Rich Safran with Seaport Research Partners. Your line is open.

<unk> just a run through of pension. So as stated this year, we're targeting to pre fund a portion of 2026 required $1 billion cash pension so anything above $6 six we would look to put into prepayment of the pension.

Speaker #7: Kim, Evan, Maria, good morning. Evan, if I may, I want you to follow up on your opening pension remarks. When we spoke in August, I brought up pension offsets, and while you weren't specific, you did seem to indicate there were some options for offsetting, you know, pension headwinds.

[Analyst 3]: Jim, Evan, Maria, good morning. Evan, if I may, I wanted to follow up on your opening pension remarks. When we spoke in August, I brought up pension offsets. While you weren't specific, you did seem to indicate there were some options for offsetting, you know, pension headwinds. I understand your comments about 2025 cash flow applied to pension offsets, but could you discuss your plans in a bit more detail and tell us if there's anything else being contemplated that could offset 2026 to 2027 free cash flow headwinds from pension? Thanks.

Just sort of baseline and yet in 2025, when you look at impact to cash from pension we benefited from pension recoveries in excess of contributions because of the prior prepayments that we made.

Speaker #7: Now, I understand your comments about $25 million cash flow applied to pension offsets. But could you discuss your plans in a bit more detail and tell us if there's anything else being contemplated that could offset $26 million or $27 million free cash flow headwinds from pension?

<unk> 2026 will also benefit from recoveries and excess of contributions, but less so than 2025 as we intend to make some contributions next year. So the way to think about it is starting in 2027, we expect pension cash contribution to be neutral to free cash flow as pension recoveries.

Speaker #7: Thanks.

Speaker #2: Sure thing, Rich. So, just a run-through of the pension. As stated, this year we're targeting to pre-fund a portion of 2026's required $1 billion cash pension.

Jay Malave: Sure thing, Rich. Just a run-through of pension. As stated, this year, we're targeting to pre-fund a portion of 2026's required $1 billion cash pension. Anything above $6.6 billion, we would look to put into prepayment of the pension. Just sort of baselining it, in 2025, when you look at impact to cash from pension, we benefited from pension recoveries in excess of contributions because of the prior prepayments that we made. 2026 will also benefit from recoveries in excess of contributions, but less so than 2025, as we intend to make some contributions next year. The way to think about it is starting in 2027, we expect pension cash contribution to be neutral to free cash flow, as pension recoveries and pension contributions should be equal on an annual basis.

And pension contributions should be equal on an annual basis. So while we expect that to be net neutral cash impact in 2007, it could present, a headwind year over year compared to 2026. However, our intention is to offset any of that headwind in 2027 with growth and operational cash.

Speaker #2: So, anything above 6.6 we would look to put into prepayment of the pension. Just sort of baselining it, in 2025, when you look at the impact to cash from pension, we'd benefited from pension recoveries in excess of contributions because of the prior prepayments that we made.

Okay.

The next question comes from Peter Dubicki with Alembic. Your line is open.

Speaker #2: 2026 will also benefit from recoveries in excess of contributions, but less so than 2025, as we intend to make some contributions next year. So, the way to think about it is that starting in 2027, we expect pension cash contributions to be neutral to free cash flow, as pension recoveries and pension contributions should be equal on an annual basis.

Good morning, everyone.

Hey, Jim and I mean, obviously you have 35 visibility has improved now I would think.

Through the midterm.

In 19 different innovation in the air vehicles Sustainment contract could you kind of tighten up for us in terms of the growth outlook on that program and any margin opportunities and but also the remaining risk on the block four development effort and how that might impact on dynamics.

Speaker #2: So, while we expect that to be net neutral cash impact in '27, it could present a headwind year-over-year, compared to 2026, however, our intention is to offset any of that headwind in 2027 with growth in operational cash.

Jay Malave: While we expect that to be net neutral cash impact in 2027, it could present a headwind year over year compared to 2026. However, our intention is to offset any of that headwind in 2027 with growth in operational cash.

Sure I'll start so we ended the third quarter with a backlog of 265 jets and Thats before adding the extra 151 that came in the first week of Q4. So we have seen strong support domestically and internationally and so given.

Speaker #3: The next question comes from Pete Skibitzky with Alembic. Your line is open.

Operator: The next question comes from Pete Skibitsky with Alembic. Your line is open.

Assuming that the strong advocacy, we've seen from lawmakers and the focus on air superiority from the administration that gives us confidence in maintaining the 156 a year right.

Speaker #7: Good morning, everyone. Jim and Evan, obviously F-35 visibility is improved now, I would think, at least through the midterm with the 18 and 19 digitization and the air vehicle sustainment contract.

[Analyst 3]: Morning, everyone. Hey, Jim and Evan, obviously, F-35 visibility is improved now, I would think, at least through the midterm with the 18 and 19 depotization and the air vehicles, the statement contract. Could you kind of tie it up for us in terms of the growth outlook on that program and any margin opportunities, and also, you know, the remaining risk on the Block IV development effort and how that might impact dynamics?

In terms of growth for the program the largest growth driver will be sustainment as we stand up new capabilities and deliver more jets. So that will pace overall F 35 growth on a percentage basis.

Speaker #7: Could you kind of tie it up for us in terms of the growth outlook on that program and any margin opportunities? And but also, you know, the remaining risk on the Block 4 development effort and how that might impact dynamics.

We also see some margin opportunity.

Speaker #2: Sure, I'll start. So, we ended the third quarter with a backlog of $265 jets, and that's before adding the extra $151 that came in the first week of Q4.

F 35, as we have really hit a good groove on production and that will continue to translate into operational results and our top priorities are delivering out this year with a guidance of more like $1 75 to 190.

Jay Malave: Sure, I'll start. We ended the third quarter with a backlog of 265 jets, and that's before adding the extra 151 that came in the first week of Q4. We have seen strong support domestically and internationally. Given, presuming that the strong advocacy we've seen from lawmakers and the focus on air security from the administration, that gives us confidence in maintaining the 156 a year rate. In terms of growth for the program, the largest growth driver will be sustainment as we stand up new capabilities and deliver more jets. That will pace overall F-35 growth on a % basis. We also see some margin opportunity across F-35 as we have really hit a good groove on production, and that will continue to translate into operational results.

Speaker #2: So, we have seen strong support, domestically and internationally. And so, given the strong advocacy we've seen from lawmakers and the focus on air security from the administration, that gives us confidence in maintaining the 156-a-year rate.

And a big focus on completing the block for development yes.

Black for Pete I can speak to that as Jim here.

And that.

We have with the incoming administration, the highest level of collaboration and cooperation between government Lockheed Martin as the prime contractor on the air vehicle and our supplier partners. Many of which you would know by name. So RPX is the EW.

Speaker #2: In terms of growth for the program, the largest growth driver will be sustainment, as we stand up new capabilities and deliver more jets. So, that will pace overall F-35 growth on a percentage basis.

Speaker #2: We also see some margin opportunity across F-35, as we have really hit a good groove on production, and that will continue to translate into operational results.

RPX as a distributed.

After system VA is the EW system.

<unk> our partner with the government on the radars et cetera. So we have the best collaboration we've ever had and openness with the government not only to work with us in a team work fashion across all of those companies in the U S government and the joint program office, but also to remove barriers and.

Speaker #2: And our top priorities are delivering out this year with guidance of more like $175 million to $190 million, and a big focus on completing Block 4 development.

Jay Malave: Our top priorities are delivering out this year with a guidance of more like 175 to 190 and a big focus on completing Block IV development.

Speaker #5: Yeah, and with Block 4, Pete, I could speak to that, Jim, here. In that we have, with the incoming administration, the highest level of collaboration and cooperation between government, Lockheed Martin is the prime contractor on the air vehicle, and our supplier partners many of which you would know by name.

James Taiclet: Yeah, and with Block IV, Pete, I can speak to that. It's Jim here. We have, with the incoming administration, the highest level of collaboration and cooperation between government. Lockheed Martin is the prime contractor on the air vehicle and our supplier partners, many of which you would know by name. RTX is the distributed ATRA system. BAE is the EW system. Northrop Grumman is our partner with the government on the radars, et cetera. We have the best collaboration we've ever had and openness with the government, not only to work with us in a teamwork fashion across all of those companies and the U.S. government and the Joint Program Office, but also to remove barriers and delays on the government side, which heretofore hadn't been addressed that aggressively, I'll say.

The delays on the government side, which.

Before hasn't been addressed.

Aggressively I'll say and so we're in a positive conversation.

With that.

Parties that are involved in this block for monetization program, which is really really important to keep everything on time to keep the production line going.

Speaker #5: So, RTX is the W. Sorry, RTX is the distributed aperture system. BAE is the EW system. Northrop Grumman's our partner with the government on the radars, etc.

So I am confident that we will have a successful block for rollout and one where the government industry, including the supply chain are collaborating in ways that we've never done before so I'm optimistic about block four it is super challenging by the way some of the technologies that are coming on to the jet and having to be integrated or complex.

Speaker #5: So, we have the best collaboration we've ever had, and openness with the government not only to work with us in a teamwork fashion across all of those companies and the U.S. government and the joint program office, but also to remove barriers and delays on the government side, which, heretofore, hadn't been addressed that aggressively, I'll say.

But I do think that it's going to make the aircrafts, even more dominant than ever before and.

<unk> current file I can tell you if you've got the best EW the best sensor suite at the best weapons and the best radar Youre going to win and that's what we're out for.

Speaker #5: And so, we're in a positive conversation with all the parties that are involved in this Block 4 modernization program, which is really, really important.

James Taiclet: We are in a positive conversation with all the parties that are involved in this Block IV modernization program, which is really, really important to keep everything on time, to keep the production line going. I'm confident that we will have a successful Block IV rollout and one where government industry, including the supply chain, are collaborating in ways that we've never done before. I'm optimistic about Block IV. It is super challenging, by the way. Some of the technologies that are coming onto the jet and having to be integrated are complex. I do think that it's just going to make the aircraft even more dominant than ever before. Any ex-pilot or current pilot can tell you if you've got the best EW, the best sensor suite, the best weapons, and the best radar, you're going to win. That's what we're out for.

The next question comes from Myles Walton of Wolfe Research. Your line is open.

Speaker #5: To keep everything on time, to keep the production line going, so I'm confident that we will have a successful Block 4 rollout. And one where government, industry, including the supply chain, are collaborating in ways that we've never done before.

Thanks. Good morning, just curious on the fourth quarter implied margins that space in the low 8% range is there anything in particular driving that and then.

Speaker #5: So, I'm optimistic about Block 4. It is super challenging, by the way. Some of the technologies that are coming onto the jet and having to be integrated are complex, but I do think that it's just going to make the aircraft even more dominant than ever before.

Jim You mentioned the space based on orbit prototype.

That to be a company funded exercise and and if so what kind of R&D burden are you prepared to take for something that is if you build it hopefully the next administration will buy it.

Speaker #5: And, you know, any ex-pilot or current pilot can tell you if you've got the best EW, the best sensor suite, the best weapons, and the best radar, you're going to win.

I'll start miles on your question on the space margins.

So really duly notable thing there really has less risk retirements and some dilution based on mix. So.

Speaker #5: And that's what we're out for.

Speaker #3: The next question comes from Miles Walton of Wolf Research. Your line is open.

Operator: The next question comes from Miles Walton of Wolf Research. Your line is open.

So the implied margin for Q I would not use as a necessarily a guide for ongoing into next year, just happens to be a particularly low quarter from a risk retirement standpoint overall.

Speaker #8: Thanks. Good morning. I'm curious about the fourth quarter implied margins of space in the low 8% range. Is there anything in particular driving that? And then, Jim, you mentioned the space-based on-orbit prototype. Do you anticipate that to be a company-funded exercise? If so, what kind of R&D burden are you prepared to take for something that is, you know, if you build it, hopefully the next administration will buy it?

[Analyst 2]: Thanks. Good morning. Curious on the fourth quarter implied margins of space in a low 8% range. Is there anything in particular driving that? Jim, you mentioned the space-based on orbit prototype. Do you anticipate that to be a company-funded exercise? If so, what kind of R&D burden are you prepared to take for something that is, you know, if you build it, hopefully the next administration will buy it?

And so on Spi.

We are.

Changing the way we allocate.

Our independent R&D at this company miles and we've been evolving towards this for the last five years, but I think now we're basically at the mountain top here, which is the previous way that the company tended to aggregate and fund.

Speaker #2: I'll start, Miles. Your question on the space margins. So, really, the only notable thing there is less risk retirements and some dilution based on NICS.

R&D was each of the business units would get sort of a slice of the pie so to speak and figure out what were the most important projects for their current or prospective.

Evan Scott: I'll start, Miles, on your question on the space margins. The only notable thing there really is less risk retirements and some dilution based on NICs. The implied margin for Q, I would not use as necessarily a guide for ongoing into next year. It just happens to be a particularly low quarter from a risk retirement standpoint overall.

Speaker #2: So, the implied margin for Q3, I would not use as necessarily a guide for ongoing into next year; it just happens to be a particularly low quarter from a risk retirement standpoint overall.

Pursuits, if you will and they would internally almost allocate their piece within that.

We've done over the years as we've migrated that approach to one where it does care for the current needs. If you will in the business areas, but an increasing proportion of the corpus and the corpus hasn't grown that much larger.

Speaker #5: And so, on SBI, we are changing the way we allocate our independent R&D at this company, Miles. We have been evolving towards this for the last five years, but I think now we're basically at the mountaintop here. The previous way that the company tended to aggregate and fund IR&D was that each of the business units would get sort of a slice of the pie, so to speak.

James Taiclet: On SBI, we are changing the way we allocate our independent R&D at this company, Miles. We have been evolving towards this for the last five years, but I think now we're basically at the mountaintop here, which is the previous way that the company tended to aggregate and fund IR R&D was each of the business units would get sort of a slice of the pie, so to speak, and figure out what were the most important projects for their current or prospective pursuits, if you will. They would internally almost allocate their piece within that. Over the years, we've migrated that approach to one where it does care for the current needs, if you will, in the business areas, but an increasing proportion of the corpus, and the corpus hasn't grown that much larger, but it has increased over these years.

But it hasnt increased over these years, but much of that Corpus now goes to real highlight corporate level R&D programs. So I gave you a couple of them SDI. This space based on etcetera is one of those we are building prototypes full up operational prototypes not things in labs.

Speaker #5: And figure out what were the most important projects for their current or prospective pursuits, if you will. And they would internally almost allocate their piece within that.

<unk> not stuff on tests and things that will go into space or in the air or fly across a missile range. These are real devices that will work and that can be produced at scale. So the space based interceptors one week.

Speaker #5: What we've done over the years is we've migrated that approach to one where it does care for the current needs, if you will, in the business areas, but an increasing proportion of the corpus, and the corpus hasn't grown that much larger, but it has increased over these years.

<unk> been pursuing already and that's all I can say about that.

Economists Black Hawk I mentioned earlier years in the making ready to go into production. We have a protection production design that we are going to be building the prototype for and fly in a year or so.

Speaker #5: But much of that corpus now goes to real highlight corporate-level R&D programs. So, I'll give you a couple of them. You know, SBI, the Space-Based Interceptor, is one of those.

James Taiclet: Much of that corpus now goes to real highlight corporate-level R&D programs. I'll give you a couple of them. SBI, the Space-Based Interceptor, is one of those. We are building prototypes, full-up operational prototypes, not things in labs, not stuff on test stands, things that will go into space or in the air or fly across a missile range. These are real devices that will work and that can be produced at scale. The Space-Based Interceptor is one we've been pursuing already. That's all I can say about that. Autonomous Black Hawk, I mentioned earlier, years in the making, ready to go into production. We have a production design that we are going to be building the prototype for and flying in a year or so. Another is this notion of sixth-generation technology insertion into the F-35 Lightning II and F-22 Raptor.

There is this notion of.

Sixth generation technology insertion into the F 35, and F. 'twenty two how do we take the Skunk works.

Speaker #5: We are building operational prototypes—full-up operational prototypes, not things in labs or on test stands. These are things that will go into space, in the air, or fly across a missile range.

Activities that were.

Designed to go into and Gad and other potential opportunities some of which are classified and we can't talk about those either but we develop the sixth generation capabilities, whether it's stealth propulsion inlet designs coatings those kinds of things.

Speaker #5: These are real devices that will work and that can be produced at scale. So, the space-based interceptor is one we've been pursuing already. And that's all I can say about that.

And in Palm balance at Skunk works, which we can actually backward integrate into F 35 in F. 'twenty two and are doing so so those are a few of the.

Speaker #5: Autonomous Blackhawk, I mentioned earlier, years in the making. Ready to go into production. We have a production design that we are going to be building the prototype for and flying in a year or so.

And of the Big bet Homerun heavy allocation to R&D, where we are actually building prototype vehicles to demonstrate to the government.

Speaker #5: Another is this notion of six-generation technology insertion into the F-35 and F-22. How do we take the Skunk Works activities that were designed to go into NGAD and other potential opportunities, some of which are classified and we can't talk about those either, but we developed these six-generation capabilities, whether it's stealth, propulsion, inlet designs, coatings, those kinds of things.

Haps alongside with the new entrants you could look at it that way, where we can show them of working vehicle that we can produce at scale that they can rely on we're pivoting our companies approach to that we're going to keep answering rfps and <unk> in the traditional way as well, but we are now in the business of <unk>.

James Taiclet: How do we take the Skunk Works activities that were designed to go into NGAD and other potential opportunities, some of which are classified, and we can't talk about those either, but we develop these sixth-generation capabilities, whether it's stealth, propulsion, inlet designs, coatings, those kinds of things in Palmdale at Skunk Works, which we can actually backward integrate into F-35 Lightning II and F-22 Raptor and are doing so. Those are a few of the big bet, home run, heavy allocation to R&D where we are actually building prototype vehicles to demonstrate to the government, perhaps alongside with the new entrants, you could look at it that way, where we can show them a working vehicle that we can produce at scale that they can rely on. We're pivoting our company's approach to that.

Self funding prototypes at the corporate level, which we can actually demonstrate real capability leapfrogged to our customers.

Speaker #5: In Palmdale, at Skunk Works, we can actually backward integrate into the F-35 and F-22, and we are doing so. So, those are a few of the, you know, kind of the big bet, home run, heavy allocation to R&D.

The next question comes from Kristine <unk> of Morgan Stanley. Your line is open.

Hey, good morning, everyone first on the F 35.

Speaker #5: We are actually building prototype vehicles to demonstrate to the government, perhaps alongside the new entrants. You could look at it that way, where we can show them a working vehicle that we can produce at scale, one that they can rely on.

Lots of 18 to 19 can you talk more about the pricing and expected margin of this it sounds like the price project from previous years with less than the rate of inflation for what you've signed and with a firm.

Speaker #5: We're pivoting our company's approach to that. We're going to keep answering RFPs and RFIs in the traditional way as well. But we are now in the business of self-funding prototypes at the corporate level, which we can actually demonstrate real capability leapfrogs to our customers.

Prices are the fee structure, how should we think about the margins of the slot versus a previous slots and ultimately what are the key milestones that would unlock that incentive fee for higher margin later down the road.

James Taiclet: We're going to keep answering RFPs and RFIs in the traditional way as well, but we are now in the business of self-funding prototypes at the corporate level, which we can actually demonstrate real capability leapfrogs to our customers.

Christine it's important to note that with 19, we're transitioning to a true firm fixed price contract relative to the Fas that we've seen previously so that's going to give us the most opportunity to truly drive operational performance, particularly with the investments that we've made in the aircraft.

Speaker #3: The next question comes from Christine Lewog of Morgan Stanley. Your line is open.

Operator: The next question comes from Christine Leawog of Morgan Stanley. Your line is open.

Speaker #9: Hey, good morning, everyone. First, you know, on the F-35 lots 18 and 19, can you talk more about the pricing and expected margin of this?

[Analyst 4]: Hey, good morning, everyone. On the F-35 lots 18 and 19, can you talk more about the pricing and expected margin of this? It sounds like the price project from previous years was less than the rate of inflation for what you've assigned. With a firm price incentive fee structure, how should we think about the margins of this lot versus the previous lots? Ultimately, what are the key milestones that would unlock that incentive fee for higher margin later down the road?

And overall changes to our digitizing our operations. So therefore, we believe we've got some margin opportunity.

Speaker #9: It sounds like the price per jet from previous years was less than the rate of inflation for what you've assigned. And with a firm price incentive fee structure, how should we think about the margins of this lot versus the previous lots?

19 relative to prior lots and then additionally, as we've worked through some of the challenge we saw two or three.

That clears the deck in a sense, it allowing kind of a more stable baseline for us to drive performance on F 35, so without getting to specifics on the margin expectation, we do feel some opportunity on the F 35 going forward relative to prior results.

Speaker #9: And ultimately, what are the key milestones that would unlock that incentive fee for higher margin later down the road?

Speaker #2: Morning, Christine. It's important to note that with Lot 19, we are transitioning to a true firm fixed-price contract relative to the FAAF that we've seen previously.

Jay Malave: I want to, Christine, it's important to note that with Lot 19, we are transitioning to a true firm fixed price contract relative to the FBM that we've seen previously. That's going to give us the most opportunity to truly drive operational performance, particularly with the investments that we've made in the aircraft and overall changes to digitizing our operations. Therefore, we believe we've got some margin opportunity in Lot 19 relative to prior lots. Additionally, as we've worked through some of the challenges we saw in TR3, that clears a deck in a sense of allowing kind of a more stable baseline for us to drive performance on F-35. Without getting to specifics on the margin expectation, we do view some opportunity on F-35 going forward relative to prior results.

The next question comes from Gautam Khanna with TD Cowen Your line is open.

Speaker #2: So, that's going to give us the most opportunity to truly drive operational performance particularly with the investments that we've made in the aircraft and overall changes to digitizing our operations.

Yes. Thank you I was curious if you could.

Talk a little bit about some of the bigger international campaign, you're pursuing right now across the segments.

Speaker #2: So, therefore, we believe we've got some margin opportunity in Lot 19 relative to prior lots. Additionally, as we work through some of the challenges we saw in TR3, that clears the deck in a sense, allowing for a more stable baseline for us to drive performance in F-35.

Absolutely.

From an international perspective, we are looking really across the entire company to each business area has key international pursuits.

Clearly on the ammunition side Theres strong demand for air and missile defense.

Speaker #2: So, without getting too specifics on the margin expectation, we do view some opportunity on F-35 going forward relative to prior results.

Our products and potentially new customers emerging there as well.

From an RMS perspective International Blackhawk continues to be a focus for us as well as our radar programs.

Speaker #3: The next question comes from Gautam Kana with TD Cowan. Your line is open.

Operator: The next question comes from Gautam Khanna with TD Cowen. Your line is open.

From a space perspective, we are looking at international satellite opportunities with some key competitions coming up.

And the next year.

Speaker #7: Yes, thank you. I was curious if you could talk a little bit about some of the bigger international campaigns you're pursuing right now across the segments.

[Analyst 3]: Yes, thank you. I was curious if you could talk a little bit about some of the bigger international campaigns you're pursuing right now across the segments. Thanks.

From an aeronautics perspective naturally a 35 continues to be a big focus for us as well as <unk> and F 16 anything you'd add.

Speaker #7: Thanks.

Speaker #2: Absolutely. From an international perspective, we are looking really across the entire company. Each business area has key international pursuits. Clearly, on the munitions side, there's strong demand for our air and missile defense.

Okay.

Jay Malave: Absolutely. From an international perspective, we are looking really across the entire company. Each business area has key international pursuits. Clearly, on the munition side, there's strong demand for our air and missile defense products and potentially new customers emerging there as well. From an RMS perspective, international Black Hawk continues to be a focus for us, as well as our radar programs. From a space perspective, we are looking at international satellite opportunities with some key competitions coming up in the next year. From an aeronautics perspective, naturally, F-35 continues to be a big focus for us, as well as C-130 and F-16. Anything you'd add, Jim?

The next question comes from Rob Stallard of vertical research your line is open.

Thanks, so much good morning.

Hey, good morning.

I just wanted to follow up on your answer to miles as question earlier about R&D and some of the comments you made through the call on Capex.

Speaker #2: Our products and potentially new customers are emerging there as well. From an RMS perspective, international Blackhawk continues to be a focus for us, as well as our radar programs.

It does sound like we could be expecting a structural step up.

<unk> most of it has to invest as an individual company.

Speaker #2: From a space perspective, we are looking at international satellite opportunities with some key competitions coming up in the next year. From an aeronautics perspective, naturally, the F-35 continues to be a big focus for us, as well as the C-130 and F-16.

And either capex or <unk> going forward.

I mean, we need to reconsider and well say that.

Percentage of revenues that goes into Capex as a percentage of revenues. It goes into company funded R&D is unlikely to be going forward.

Rob we're not intending to step up the percentages of revenue on either case, what we're doing is more.

Speaker #2: Anything you'd add, Jim?

Material allocations of that Corpus again, the corpus isn't necessarily changing in a material way as our is not our plan. It is allocating in a better way to compete and meet with the government's requests are these days and so there's less traditional contracting going on in the government at the moment in some areas not in all.

Speaker #3: The next question comes from Rob Stallard of Vertical Research. Your line is open.

Operator: The next question comes from Rob Stallard of Vertical Research. Your line is open.

Speaker #8: Thanks so much. Good morning.

[Analyst 5]: Thanks very much. Good morning.

Speaker #5: Good morning.

Jay Malave: Good morning.

Speaker #8: Just wanted to follow up on your answer to Miles' question earlier about R&D and some of the comments you made throughout the call on CapEx.

[Analyst 5]: Just wanted to follow up on your answer to Miles's question earlier about R&D and some of the comments you made through the call on CapEx. It does sound like we could be expecting a structural step up in what Lockheed Martin has to invest as an individual company in either CapEx or IRAD going forward. Does this mean we need to reconsider what, say, the % of revenues that goes into CapEx or the % of revenues that goes into company-funded R&D is likely to be going forward?

Speaker #8: It does sound like we could be expecting a structural step up in what Lockheed Martin has to invest as an individual company in either CapEx or IRAD going forward.

So those huge awards, we're getting but we do want to compete in a more effective way and we've been working towards this again with the same proportions in percentages roughly of revenue allocated to IR R&D and Capex and those are the those are the boundary conditions that we intend to stay in.

Speaker #8: So, does this mean we need to reconsider what, say, the percentage of revenues that goes into CapEx or the percentage of revenues that goes into company-funded R&D?

Speaker #8: Is it likely to be going forward?

On both of those investments.

Speaker #5: Rob, we're not intending to step up the percentages of revenue on either case. What we're doing is more material allocations of that corpus. Again, the corpus isn't necessarily changing in a material way, as that's not our plan.

James Taiclet: Rob, we're not intending to step up the % of revenue on either case. What we're doing is more material allocations of that corpus. Again, the corpus isn't necessarily changing in a material way, is not our plan. It is allocating it in a better way to compete and meet what the government's requests are these days. There's less traditional contracting going on in the government at the moment in some areas, not in all. I saw those huge awards we were getting. We do want to compete in a more effective way. We've been working towards this, again, with the same proportions and % of revenue allocated to IR&D and CapEx. Those are the boundary conditions that we intend to stay in on both of those investment scenarios.

Scenarios.

The next question comes from Mike <unk> with <unk> Securities. Your line is open.

Hey, good morning, guys. Thanks for taking the questions.

Speaker #5: It is allocating it in a better way to compete and meet what the government's requests are these days. And so, there's less traditional contracting going on in the government at the moment.

Maybe just on the NFC margin fourth quarter. It looks like we're going to get a nice above 10% sequential step up in growth. The margins look like it could be for the low end of year is that is that related to the classified program or what's sort of the dynamic there given the volume growth growth on some of the.

Speaker #5: In some areas, not in all, I saw those huge awards we were getting. But we do want to compete in a more effective way, and we've been working towards this.

Speaker #5: Again, with the same proportions and percentages roughly of revenue allocated to IR&D and CapEx, those are the boundary conditions that we intend to stay in.

The core profitable legacy programs.

MMC margins continue to pace, the overall company and be strong.

We are scaling multiple munitions as you know and with that comes a little bit of dilution on the upfront part of that scaling those programs. So we expect that the normal margins. We would have seen on prior production programs just with the very accelerated growth, that's just creating a little bit of dilution on the front end and we've got long term.

Speaker #5: On both of those investment scenarios.

Speaker #3: The next question comes from Mike Charmoly with Truist Securities. Your line is open.

Operator: The next question comes from Mike Charmolly with Truist Securities. Your line is open.

Speaker #7: Hey, morning, guys. Thanks for taking the questions. Maybe just on the MSC margin for the fourth quarter, it looks like we're going to get a nice, you know, above 10% sequential step-up in growth.

Jay Malave: Hey, morning, guys. Thanks for taking the questions. Maybe just on the MFC margin, fourth quarter, it looks like we're going to get a nice, you know, above 10% sequential step up in growth. The margins look like it could be for the low of the year. Is that related to the classified program, or what's sort of the dynamic there, given the volume growth on some of the core profitable legacy programs?

Confidence in MFC overall performance.

The next question comes from Scott <unk> with Melius Research Your line is open.

Speaker #7: The margins look like they could be for the low of the year. Is that related to the classified program, or what's sort of the dynamic there, given the volume growth on some of the core profitable legacy programs?

Good morning, Jim and Evan.

Good morning, I wanted to get back to Doug's question, specifically dive into this classified Aeronautics program I think the most recent disclosure in the 10-Q a portion of the charge was related to additional phases and I presume that some sort of fixed price production options do you have those prices for those options.

Speaker #2: Yeah, MSC margins continue to pace the overall company and be strong. We are scaling multiple munitions, as you know, and with that comes a little bit of dilution on the upfront part of that scaling.

Evan Scott: Yeah, MFC margins continue to pace the overall company and be strong. We are scaling multiple munitions, as you know, and with that comes a little bit of dilution on the upfront part of that scaling. Those programs still, we expect that the normal margins we would have seen on prior production programs, just with the very accelerated growth, that's just creating a little bit of dilution on the front end. We've got long-term confidence in MFC overall performance.

Locked in with suppliers if.

Speaker #2: Those programs, we still expect that the normal margins we would have seen on prior production programs, just with the very accelerated growth, that's just creating a little bit of dilution on the front end.

If not I'm, just kind of wondering what kind of inflation rate youre, assuming for material on the broader supply chain.

We can't speak to exactly what each of those spaces represent but youre right that theres from fixed price.

Speaker #2: And we've got long-term confidence in MSC's overall performance.

All the way through on this program and a lot of it is suppliers. So we continue to partner with our suppliers on this to make sure that we have good line of sight to what our cost basis is there.

Speaker #3: The next question comes from Scott Mikus with Melius Research. Your line is open.

Operator: The next question comes from Scott Mikus with Melius Research. Your line is open.

Speaker #8: Morning, Jim and Evan. I

[Analyst 2]: Morning, Jim and Evan.

Speaker #7: Morning.

With greater than 70% negotiated.

Speaker #8: I wanted to get back to Doug's question, specifically to dive into the classified aeronautics program. I think the most recent disclosure in the 10-Q is that a portion of the charge was related to additional phases.

Jay Malave: Morning.

[Analyst 2]: I wanted to get back to Doug's question, specifically dive into the classified aeronautics program. I think the most recent disclosure in the 10-Q is that a portion of the charge was related to additional phases. I presume that's some sort of fixed price production options. Do you have those prices for those options locked in with suppliers? If not, I'm just kind of wondering what kind of inflation rate you're assuming for material on the broader supply chain.

To date, an allowance for any growth.

I assumed in those Eac's. So this will be a program will continue to closely monitor and keep updated on but with respect to suppliers not seeing any elevated risk on that program at this point.

Speaker #8: And I presume that some sort of fixed-price production options—so do you have those prices for those options locked in with suppliers? If not, I'm just kind of wondering what kind of inflation rate you're assuming for material on the broader supply chain.

Yeah.

The next question comes from Sheila <unk> with Jefferies. Your line is open.

Good morning, guys, maybe I wanted to clarify I think it was about.

Speaker #2: We can't speak to exactly what each of those phases represents. But you're right that there's a firm fixed price all the way through on this program.

Jay Malave: We can't speak to exactly what each of those phases represent, but you're right that there's firm fixed price all the way through on this program, and a lot of it is suppliers. We continue to partner with our suppliers on this to make sure that we have a good line of sight to what our cost basis is there, with greater than 70% negotiated to date and allowance for any growth assumed in those EACs. This will be a program we'll continue to closely monitor and keep updated on. With respect to suppliers, not seeing any elevated risk on that program at this point.

Last on the 26 and 27 free cash flow can you talk about just the moving pieces of that branch inclusive of pension and Capex.

Speaker #2: And a lot of it is suppliers. So, we continue to partner with our suppliers on this to make sure that we have good line of sight to what our cost basis is there.

Yes.

Absolutely so with respect to 2025, what I want to make clear is that we are not showing any weakness in our free cash flow estimate compared to prior estimates where we're looking to do is give more clarity on how we intend to deploy that cash at the end of the year and so still staying within the range. We gave allow for prepayment.

Speaker #2: With greater than 70% negotiated to date, and allowance for any growth assumed in those EACs, this will be a program we'll continue to closely monitor.

Speaker #2: And keep updated on. But with respect to suppliers, I'm not seeing any elevated risk on that program at this point.

Of next year's pension, which is right now required or expected to be $1 billion. So.

So no change to 2025 to date.

Speaker #3: The next question comes from Sheila Kealu with Jefferies. Your line is open.

Just more clarity on intentions.

Operator: The next question comes from Sheila Kahlu with Jefferies. Your line is open.

With respect to 2026.

No change to our prior number that we had given.

Speaker #9: Good morning, guys. I wanted to clarify that I think it was Richard who asked about the free cash flow for the 26th and 27th. Can we discuss the moving pieces of that bridge, including pension and CapEx?

[Analyst 4]: Good morning, guys. Maybe I wanted to clarify, I think it was Richard who asked on the 2026 and 2027 free cash flow. Can we talk about just the moving pieces of that bridge, inclusive of pension and CapEx?

As you noted we do expect to have additional pension contributions next year. So right now assuming no incremental acceleration this year, we've got $1 billion penciled in.

Speaker #2: Absolutely. So, with respect to 2025, I want to make clear that we are not showing any weakness in our free cash flow estimate compared to prior estimates.

Jay Malave: Absolutely. With respect to 2025, what I want to make clear is that we are not showing any weakness in our free cash flow estimate compared to prior estimates. What we're looking to do is give more clarity in how we intend to deploy that cash at the end of the year. We are still staying within the range we gave, allowing for prepayment of next year's pension, which is right now expected to be $1 billion. No change to 2025 to date. It's just more clarity on intentions. With respect to 2026, no change to a prior number that we had given. As you noted, we do expect to have additional pension contributions next year. Right now, assuming no incremental acceleration this year, we've got $1 billion penciled in for that next year.

For that next year, and so think of a portion of that being offset by cash earnings which is why we will not be down but full billion dollars compared to this year with more clarity to come.

Speaker #2: What we're looking to do is give more clarity in how we intend to deploy that cash at the end of the year. And so, still staying within the range we gave, we will allow for prepayment of next year's pension, which is right now expected to be $1 billion.

The next question comes from Peter Arment with Baird. Your line is open.

Yes, Thanks, good morning, Jim.

Hey, Jim have you guys quantified Golden dome in terms of.

Speaker #2: So, no change to 2025. To date, it's just more clarity on intentions. With respect to 2026, no change to our prior number that we had given.

There is 27 billion.

The initial funding and obviously there is a number that's been thrown around a 175 plus billion, but Lockheed seems like it's really well positioned across so many existing systems and have you guys quantified. What you think that opportunity is I know Jennifer I'm going be out next month with his architecture, but I think theres a lot of existing systems that are in play here and do you guys.

Speaker #2: As you noted, we do expect to have additional pension contributions next year. So, right now, assuming no incremental acceleration this year, we’ve got $1 billion penciled in.

Had the capacity to support it thanks Peter.

Speaker #2: For next year, think of a portion of that being offset by cash earnings, which is why we will not be down the full billion dollars compared to this year, with more clarity to come.

Jay Malave: Think of a portion of that being offset by cash earnings, which is why we will not be down the full $1 billion compared to this year with more clarity to come.

Peter the only way to quantify the potential revenue opportunity is to is to actually see the mission technology roadmap over time for homeland Air Defense, that's not available yet and what I mean by that is.

Speaker #3: The next question comes from Peter Arment with Baird. Your line is open.

Operator: The next question comes from Peter Arment with Baird. Your line is open.

What sites with what radius.

Speaker #8: Yeah, thanks. Good morning, Jim and Evan. Hey, Jim, have you guys quantified gold and dome in terms of, you know, there's $27 billion of initial funding and obviously there's a number that's been thrown around at $175-plus billion.

[Analyst 2]: Yeah, thanks. Good morning, Jim, Evan. Hey, Jim, have you guys quantified Golden Dome in terms of, you know, there's $27 billion of initial funding, and obviously, there's a number that's been thrown around at $175-plus billion. Lockheed seems like it's really well-positioned across so many existing systems. Have you guys quantified what you think that opportunity is? I know General Gutlein will be out next month with his architecture. I think there's a lot of existing systems that are in play here. Do you guys have the capacity to support it? Thanks.

And what point of time do you want to defend and from what actual threats until that's all laid out we actually won't have any sense of where the budget is being allocated for to actually create the contracts with industry to do that now.

Speaker #8: But Lockheed seems like it's really well positioned across so many existing systems. Have you guys quantified what you think that opportunity is? I know General Glutline will be out next month with his architecture, but I think there's a lot of existing systems.

We think that we've got a.

It's very very significant proportion of what the logical product sets would be no matter, how you lay out that architecture and what order you put in the geographies that domains et cetera, whether its again its radars at space assets ground based missiles.

Speaker #8: Better in play here, and do you guys have the capacity to support it? Thanks.

Speaker #5: Yeah, so Peter, the only way to quantify the potential revenue opportunity is to actually see the mission technology roadmap over time. For, you know, Homeland Air Defense, that's not available yet.

James Taiclet: Yeah. Peter, the only way to quantify the potential revenue opportunity is to actually see the mission technology roadmap over time for, you know, the homeland air defense. That's not available yet. What I mean by that is what sites with what radius and what point of time do you want to defend and from what actual threats? Until that's all laid out, we actually won't have any sense of where the budget is being allocated for to actually create the contracts with industry to do that. We think that we've got a very, very significant proportion of what the logical product sets would be, no matter how you lay out that architecture and what order you put in the geographies, the domains, et cetera, whether it's, again, it's radars, it's space assets, it's ground-based missiles, et cetera. We're a very, very important player in each of those arenas.

Et cetera.

Very very important player in each of those arenas.

Speaker #5: And what I mean by that is: what sites, with what radius, and what point in time do you want to defend? And from what actual threats?

We'd love to be able to quantify and give you all ranges on this but until that pattern is laid out and the budget allocated right along with it.

Speaker #5: Until that's all laid out, we actually won't have any sense of where the budget is being allocated for, to actually create the contracts with industry to do that.

We can't make an estimate of it.

Alright, great. Thanks, everybody I think we've come to the top of the hour. So I'm just going to hand off to Jim for some final comments.

Speaker #5: Now, we think that we've got a very, very significant proportion of what the logical product sets would be, no matter how you lay out that architecture.

Hey, thanks, everyone for joining our call today in closing our record backhaul. It logged strong sales growth in our solid operational performance you have even in a great confidence that we're going to finish the year strong I want to thank our 120000, Lockheed Martin employees for continuing to deliver these effective reliable solutions that we've been talking about this morning.

Speaker #5: And what order do you put in the geographies, the domains, et cetera? Whether it's, again, it's radars, it's space assets, it's ground-based missiles, et cetera.

They keep America, and our allies safe and I look forward to speaking with you again in January for our fourth quarter and full year earnings call.

Speaker #5: We're very, very important players in each of those arenas. We'd love to be able to quantify and give you all ranges on this, but until that pattern is laid out and the budget allocated right along with it, we can't make an estimate of it.

This concludes today's conference call. Thank you for joining you may now disconnect.

James Taiclet: We'd love to be able to quantify and give you all ranges on this, but until that pattern is laid out and the budget allocated right along with it, we can't make an estimate of it.

Operator: All right. Great. Thanks, everybody. I think we've come to the top of the hour. I'm just going to hand off to Jim for some final comments.

James Taiclet: Hey, thanks, everyone, for joining our call today. In closing, our record backlog, strong sales growth, and our solid operational performance give Evan and I great confidence that we're going to finish the year strong. I want to thank our 120,000 Lockheed Martin employees for continuing to deliver these effective, reliable solutions that we've been talking about this morning. They keep America and our allies safe. I look forward to speaking with you again in January for our fourth quarter and full-year earnings call.

Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.