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WMAC 2023-Lockheed Martin

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F500-2023-060-Lockheed-Martin

Weapons manufacturer Lockheed Martin had a disappointing year in 2022 as revenue and operating profit both declined, 1.6% and 8.5% respectively. In his 2022 letter to shareholders, CEO James Taiclet attributed the lackluster performance to continued “pandemic impacts and supply-chain challenges,” saying he expected the company to return to sustained growth in 2024. 
<ul> 
 	<li>In early 2022, Lockheed Martin canceled a planned $4.4 billion acquisition of rocket engine manufacturer Aerojet, several weeks after the Federal Trade Commission sued to block the deal for violating antitrust regulations.</li> 
 	<li>Later in 2022, the Chinese government sanctioned the company for selling weapons to Taiwan, barring Lockheed from importing goods or making new investments in China.</li> 
 	<li>The armsmaker inked deals worth a combined $37.8 billion with the U.S. government, its biggest customer, for its signature F-35 fighter jet.</li> 
</ul>

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F500 2022-Lockheed Martin

2021 was a year of mixed fortunes for defense manufacturer Lockheed Martin. Net income dropped 8% to $6.3 billion, as earnings took a hit when the company had to fund a pension settlement charge of $1.7 billion during the third quarter. But Lockheed Martin was still able to bump up net sales for the year by 2.5%, largely driven by deliveries of 142 F-35 combat aircraft, up from 120 the previous year. The F-35 accounts for around one-quarter of the company’s revenue.

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G500 144 Lockheed Martin

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The year 2020 was a time of growth for the aerospace defense giant. Despite pandemic-related supply chain disruptions, Lockheed Martin still managed to increase net sales by 9%, to $65.4 billion. The F-35 program, off to a rocky start, rebounded with the company delivering 120 orders over the year. The firm’s production backlog also rose, sitting at $147.1 billion as of spring 2021. Also in 2021, Lockheed Martin agreed to acquire U.S. manufacturer Aerojet Rocketdyne Holdings for $4.4 billion, a move to advance its standing in the rocket propulsion field. Following a strong first quarter, the company pushed up its sales and profits outlook for the year ahead. &quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">The year 2020 was a time of growth for the aerospace defense giant. Despite pandemic-related supply chain disruptions, Lockheed Martin still managed to increase net sales by 9%, to $65.4 billion. The F-35 program, off to a rocky start, rebounded with the company delivering 120 orders over the year. The firm’s production backlog also rose, sitting at $147.1 billion as of spring 2021. Also in 2021, Lockheed Martin agreed to acquire U.S. manufacturer Aerojet Rocketdyne Holdings for $4.4 billion, a move to advance its standing in the rocket propulsion field. Following a strong first quarter, the company pushed up its sales and profits outlook for the year ahead.

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F500-2021-49-Lockheed Martin

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G500-2020-182-Lockheed-Martin

Lockheed Martin launched to new heights in 2019, as revenues grew 11.3% and profits 23.5%, and its stock climbed nearly 50%. Particularly notable was the continued success of the F-35 program: Lockheed delivered 134 of the fighters in 2019, and won new contracts including a Pentagon buy of 478 of the advanced jets for $34 billion. That adds to a production backlog that now sits at $144 billion, much larger than those of competitors. Despite global headwinds in early 2020, Lockheed’s operations haven’t yet shown signs of a stall; the company in July announced Q2 2020 earnings that beat expectations. The company is now being helmed by a new corporate pilot: James Taiclet, who was formerly the chief executive of American Tower, a real estate investment trust. Taiclet succeeds Marillyn Hewson, the top-ranked executive on Fortune's Most Powerful Women in Business list in 2018 and 2019, who stepped down as CEO in June. She will remain as Lockheed's executive chairman.

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F500-2020-057-Lockheed-Martin

Lockheed launched to new heights in 2019. Revenues grew 11.3% and profits 23.5%, making it the most profitable aerospace company on the 500. Its stock climbed nearly 50%—well ahead of the robust returns of the broader market. Particularly notable was the continued success of the F-35 program, which for a time risked becoming a costly boondoggle. After producing 91 of the fighters in 2018, Lockheed delivered 134 in 2019, and won new contracts including a Pentagon buy of 478 of the advanced jets for $34 billion. That adds to a production backlog that now sits at $144 billion, much larger than those of competitors. Despite global headwinds in early 2020, Lockheed’s operations haven’t yet shown signs of a stall—with first-quarter net earnings up slightly year over year, guidance for the year barely lowered, and a fresh $6.1 billion Pentagon contract for Patriot missiles.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Lockheed Martin is a global aerospace and security company involved in the research, design, and production of everything from jet fighters and missile defense systems to satellites and spacecraft. Lockheed Martin does the majority of its business with the U.S. Department of Defense and other federal agencies. Its roots go back to the early 20th century as an aircraft industry pioneer that became an important partner to the U.S. military during World War II. The modern company was formed in 1995 when Lockheed Corp. merged with Martin Marietta Corp., another large defense contractor.

Q2 2025

Q1 2025

Q4 2024

Lockheed Martin (LMT): Company Profile, Stock Price, News, Rankings

legacy

Lockheed Martin

lockheed martin

Good day, and welcome, everyone, to the Lockheed Martin First Quarter twenty twenty five Earnings Results Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Maria Richardone, Vice President, Treasurer and Investor Relations. Please go ahead.

Thank you, Sarah, and good morning. I'd like to welcome everyone to our first quarter twenty twenty five 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. Statements made in today's call that are not historical fact are considered forward looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ materially from those projected in the forward looking statements.

Please see today's press release and our SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward looking statements. We have posted charts on our website today that we plan to address during the call to supplement our comments. These charts also include information regarding non GAAP measures that may be used in today's call. Please access our website at www.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.

Thanks, Maria. Good morning, everyone, and thank you for joining us on our first quarter twenty twenty five earnings call. As you saw in the press release this morning, Lockheed Martin delivered strong all around performance in the first quarter, continuing the growth momentum we've seen over the last two years. We increased our year over year sales 4% in the quarter and generated solid cash that enabled investment of $850,000,000 in independent research and development and capital expenditures. Moreover, we provided a robust shareholder return of $1,500,000,000 through dividends and share repurchases during the quarter.

As Evan will discuss in a moment, these results reinforce our confidence in our full year guidance of mid single digit growth in sales, 11% segment operating margin and double digit growth in free cash flow per share. Our strong start in Q1 enables us to mitigate or absorb currently known tariff headwinds as well as the direct program impacts of the Next Generation Air Dominance program decision, and we maintain our original guidance for the full year. With respect to The U. S. Defense budget, we continue to operate under a full year continuing resolution that allows for new awards and the transfer of funds across programs.

And we are actively engaged with our customers to provide best value solutions for them in this process. We're applying this best value approach also to our customer interactions regarding the 2026 presidential budget request as well. This is especially applicable to the President's high priority launch of the Golden Dome for America, where we are describing how current Lockheed Martin programs that are already at scaled production can contribute immediately to the solution. Our twenty first century security strategy where we integrate existing and new satellites, aircraft, ships, missile launchers and command and control systems with constantly upgradable digital technologies was tailor made for Golden Dome. In addition to the significant opportunities presented by this project, our advanced air and missile systems have recently won several large missile program awards in the first quarter already comprising up to $10,000,000,000 in future work.

These include substantial contracts for Precision Strike Missiles or PRISM, terminal high altitude area defense or THAAD, and joint air to surface standoff missiles and long range anti ship missiles. These are among the most sophisticated and effective guided missile systems in the world and are continuously proving themselves in actual combat operations. Lockheed Martin Space also received a modification to their existing contract for next generation of U. S. Deterrence at sea.

The upgraded missile, often referred to as the Fleet Ballistic Missile, is called the Trident II D5 life extension. Lockheed Martin has provided this critical proven deterrence capability for seventy years. And this award launches the technology refresh that will continue this franchise for decades into the future. Beyond missiles, our space team recently won a contract on a classified program in which we will demonstrate highly advanced capabilities and the latest cutting edge technologies available. We've proven these new capabilities on orbit and are ready to produce these vehicles at scale right now.

This is another example of our ability to apply the latest technology at a level of reliability that can quickly improve the ability to deter armed conflict and win it if need be. We also received the contract to integrate a system of next generation infrared sensors on the F-twenty two Raptor to enhance the aircraft survivability and lethality. As a former Air Force pilot, I can provide strong assurance that this new capability will further enable the fifth generation F-twenty two to shoot down enemy aircraft before they even know that we're there. Equally notable in the quarter and another example of developing on the leading edge of evolving requirements was our demonstration of cost effective countermeasures against drone warfare, complementing our existing systems for integrated air missile defense by leveraging sophisticated electronic warfare techniques to find and destroy swarms of drones. Our team conducted the first in a series of innovative demos featuring a system designed to detect, track, identify and defeat a mix of small drones cost effectively, driving another value based solution for our customers.

And in another first of its kind real world demonstration, our Skunk Works team joined with the Royal Netherlands Air Force to showcase the first ever live classified data share outside The United States between an F-thirty five in flight and a Dutch command and control system during a multinational military exercise. This is a first and a significant step forward in using digital technology for the integration of ground, air, and naval forces, with the F-thirty five serving as the quarterback between several allied nations in real time. Speaking of next generation technologies, I think it's important to highlight that over the past few years, we've pivoted our long term strategy to transcend any individual program and provide cost effective solutions by combining our installed base of highly capable hardware with AI, five gs, distributed cloud, and the like. For example, the air superiority mission is being done today with a host of aircraft and other systems, many of which you all know are made by Lockheed Martin. In a combination needed to defeat even more aggressive and sophisticated adversaries, thereby deterring them from initiating a hostile action.

This mission solution orientation that we call twenty first Century Security is designed to extend the life and capabilities of our existing platforms like the F-sixteen, F-thirty five and F-twenty two in an ever increasing threat environment in a manner that's affordable to The U. S. And its allies while integrating new platforms such as NGAD into the mission fabric over time. Lockheed Martin's Broad and Deep portfolio is exclusively positioned to make this a reality. Our next generation air dominance efforts advanced many classified technologies that were aligned to this strategy.

And we plan on applying those technologies to our current systems, making our already proven products even more relevant to the future, as well as enhancing the capabilities we provide in ongoing and future development. For example, the knowledge and technology development gained from our investments in the NGAD competition strengthened our conviction to enhance the F-thirty five to a fifth generation plus capability. And I challenged the team to deliver 80% of sixth gen capability at 50% of the cost. In support of this vision, we're also committing to drive disruptive innovation and building upon our recent established internal capabilities and AI autonomy, crude uncrewed teaming and command and control systems across the whole company. We have aligned these technology investments with our customer priorities and demonstrated meaningful increases in capabilities at relatively low cost.

We've already shown the networking and teaming ability of the F-thirty five and the F-twenty two to control uncrewed vehicle systems like drone wingmen through onboard deployments of our autonomy solutions on real aircraft. Our Skunk Works team has also invented a ground and sea based drone command station powered by our operational autonomy platform, which is currently in production today for the Navy. As a central data aggregator, processing and distribution node in this architecture, the F-thirty five can execute its air combat quarterback role. The global F-thirty five fleet today stands at more than 1,100 aircraft, with a total fleet expected to be greater than 3,500, enabling The U. S.

And its allies to remain command of the skies far into the future. To further our strategic vision, my immediate focus and that of my entire management team is on operational execution, driving cost competitiveness, quality and schedule every day. With $173,000,000,000 of backlog, more than two years of sales, we're focused on delivering on time and on budget. We're continuing to execute our 1LMX end to end business process transformation, which has been underway since 2022. Through this, we've driven increased production of high demand systems like HIMARS, We accelerated software deployment through our software factory and enabled model based engineering with digital twins of many of our products.

And going forward, we have a deep bench of talent needed to continue this success. And a prime example of that is our new CFO, Evan Scott, joining us today for his first quarterly earnings call in his new role. As a twenty six year veteran of Lockheed Martin, Evan knows this business inside and out and he has a deep appreciation for our customers and their missions. I'm confident that he'll be a great asset to our executive leadership team. And now I'll turn it over to Evan to share more about his background and our financial results.

Thanks Jim, and good morning everyone. It's a privilege to be speaking with you all this morning. As Jim mentioned, I've been at Lockheed Martin for my entire career. The depth and breadth of the work we do to help American and allied service members complete their mission successfully and return home safely is truly unmatched. Over the course of my career here, I've had the opportunity to work across a range of functions, including as treasurer, and the CFO of two business areas, space and MFC.

I've been fortunate to see firsthand how this company operates and evolves to deliver value across every part of the business for both our customers and our shareholders. Even before accepting this role, I worked hand in hand with leaders from across the company on our business strategy and priorities, helping to ensure continued financial discipline and execution of our capital allocation strategy, while driving growth and advancing our mission solution focused twenty first century security strategy. I have great respect for the path that's been charted, and recognize the company's solid foundation for continued growth. My intention is to carry this momentum forward, staying true to the strategic vision that has positioned us for long term success, and working closely with Jim, Frank, and the rest of the executive team to deliver on our operational and financial targets. As we continue this journey, you have my commitment to maintaining transparency, consistency, and open dialogue with the investment community, just as we always have.

And on that note, let's turn to our performance for the quarter, starting with key financial highlights on Chart four. Our strong financial results in the first quarter position us well for the remainder of the year, highlighted by 4% sales growth and 11.6% segment margins, with all four business areas generating double digit returns, boosted by better than expected performance on contract completions at Aeronautics, RMS and Space. GAAP earnings per share of $7.28 increased 14% with benefits from higher volume, higher profit adjustments, and lower share count more than offsetting high interest expense and lower FASCAS pension adjustment. Shifting to new business, while our book to bill was less than one in the quarter, backlog remains healthy at approximately $173,000,000,000 Our largest awards in Q1 came from MFC and RMS. As Jim noted, within MFC, we recorded approximately $2,000,000,000 in orders for the JASSM LARASM large lot procurement YUCA and facilitation contracts, supporting the production ramp to 1,100 units in 2027.

At RMS, we booked six years of future work supporting the implementation phase of the Canadian Surface Combatant River Class Destroyer Program, continuing our partnership with Irving Shipbuilding to upgrade the Canadian fleet. Moving to free cash flow, we generated $955,000,000 in the quarter after investing nearly $850,000,000 into R and D and capital expenditures in the maturation of innovative technologies, digital transformation, and operational efficiencies, with the overarching goal of improving performance, providing the most complete multi domain solutions for our customers. In addition to investing in next generation capabilities, we maintained our commitment to shareholders by returning over $1,500,000,000 through dividends and share repurchases. Now, I'll hand it to Maria to discuss the business area results in more detail.

Thanks, Evan. Before I transition into the business area details, one reminder, there are no calendarization differences between 2024 and 2025. All four quarters have thirteen weeks in both periods. Okay, starting with aeronautics on chart five. First quarter sales at Aero increased 3% year over year to $7,100,000,000 The increase was primarily due to higher volumes on F-thirty five, mainly on production contracts.

Segment operating profit increased 6% year over year due to the higher volume as well as higher profit booking rate adjustments, including the benefit from favorable performance at completion on a classified contract. In February, Singapore signed the Letter of Offer and acceptance for eight F-35As. This milestone expands Singapore's program of record to 20 jets and demonstrates continued international interest in the F-thirty five and the advanced capabilities it provides. Turning to Missiles and Fire Control on chart six. Sales at MFC increased 13% from the prior year, driven by higher volume on multiple tactical and strike missile programs, including JASSM LARASSM, GMLRS, and HIMARS.

Segment operating profit improved 50% year over year, driven by higher volume and higher profit rate adjustments. The higher profit rate adjustments were primarily due to the absence of the $100,000,000 loss on a classified program we recognized in last year's first quarter. Normalizing for the loss, MFC's profit in Q1 twenty twenty five improved in line with sales at 13%, with margins up 10 basis points year over year. This quarter, we debuted the common multi mission truck family of air vehicles that can be produced rapidly and affordably for domestic and international customers. Known as COMET, this affordable mass missile has an all digital design and modularity that offers mission flexibility.

COMET demonstrates 1LMX at work. It is the result of model based engineering, which maximizes component reuse and commonality across programs to radically accelerate development. For example, for COMET, we reduced the time required to get to a preliminary design review, a major milestone, by 50%. Shifting to rotary and mission systems on chart seven. Sales at RMS increased 6% in the quarter to $4,300,000,000 driven by higher volume on the Canadian Surface Combatant and Radar programs within the Integrated Warfare Systems and Sensors portfolio and higher volume on Black Hawk at Sikorsky.

Operating profit was up 21% year over year due to the higher volume, as well as higher profit rate adjustments and favorable contract mix, including a benefit related to an intellectual property licensing arrangement. The picture to the right shows drones used by the Lockheed Martin Counter UAF team in the recent field event that Jim mentioned in his remarks. And on chart eight, we'll wrap up the business area discussion with space. Space sales decreased 2% year over year due to lower volume at National Security Space, primarily related to the Overhead Persistent Infrared Radar Program, OPIR, partially offset by higher volume at Commercial Civil Space due to LUNAR program life cycles. Despite the lower sales volume, base operating profit increased 17% compared to Q1 twenty twenty four.

This increase was driven by higher profit rate adjustments, primarily due to favorable performance at completion on certain commercial civil space programs. Lower equity earnings from United Launch Alliance partially offset this benefit, as ULA had fewer launches year over year, as well as higher initial costs associated with Vulcan profitability. The picture to the right is an LM-four hundred technology demonstration satellite that recently completed its prelaunch processing and is waiting the next available launch window at Vandenberg Space Force Base. The technology demonstrator is the latest in a series of self funded missions to demonstrate the maturity of new technology on orbit and reduce risk for our customers. The LM-four hundred is capable of serving military, commercial, or civil customers.

It can be customized to host a variety of missions and can operate in any orbit. Now, I'll turn it back over to Evan.

Thanks, Maria. Shifting gears, I'll walk through guidance on Shark nine. Our expectations for Lockheed Martin's twenty twenty five financial outlook remain unchanged from what we laid out in January, with a strong first quarter results positioning us well to achieve the consolidated full year outlook of mid single digit sales growth, solid 11% margins, and high single digit free cash flow growth of $6,700,000,000 at the midpoint. In addition, there's opportunity to increase backlog in 2025, providing a solid foundation for sustained growth. As I mentioned earlier, the strong profit we realized in the first quarter provides an increased confidence in our ability to absorb currently estimated 2025 profit impacts from tariffs

While it will take more time to complete a thorough business assessment of these dynamics, we're optimistic about achieving our profit targets for the year. And I look forward to partnering with Frank and the rest of the leadership team on the operational excellence initiatives to unlock company wide efficiencies. Now, given the dynamic backdrop, I'd like to note several key assumptions within our guidance. First, on F-thirty five, we continue to expect between 170 to 190 deliveries for the year from the world's premier fighter jet production operation, with a backlog of approximately three sixty jets at the end of Q1. And we anticipate definitizing the Lot 18 contract in the second quarter, which we expect will unlock cash currently tied up in working capital on the balance sheet.

At the same time, we're making good progress on TR3 stability and incremental capability releases. Second, the outlook assumes a certain level of tariff impact, as we expect to mitigate potential cost increases and offset cash timing pressures. We continue to work closely with our customers on this, and we'll provide updates during the course of the year if we see further impacts to our business despite those efforts. Third, our guide accommodates the direct program impacts of the NGET announcement on twenty twenty five orders, sales, profit and cash flow. As you would expect, we are currently evaluating the broader business implications, and we'll have more to share when we report on our second quarter results.

Lastly, we assume our programs are funded in a timely manner to support operational needs, and the outlook does not include a pension contribution for this year. Looking beyond our strong 2025 guide, the current backdrop supports sustained backlog strength with improved US and international budget opportunities. This provides a line of sight to stronger sales growth rates through 2027 than previously expected. This steady top line growth combined with operational improvements are expected to provide a solid foundation for consistent free cash flow generation that enables our capital deployment priorities over the next three years. Namely, to invest over $10,000,000,000 in R and D and capital expenditures, and return at least $18,000,000,000 to shareholders via dividends and repurchases, all while continuing to fund required pension contributions.

In summary, on chart 10, we're off to a solid start in 2025, and have a strong focus on operational excellence to ensure we deliver on our customer and programmatic requirements, while also building momentum towards delivering our full year guidance. In parallel, we remain committed to investing for the future and creating long term value for our customers and shareholders. With that, Sarah, let's open up the call for Q and A.

Thank you. Your first question comes from David Strauss with Barclays. Your line is open.

Good morning. Thanks. And Evan, welcome to the call. Jim, I wanted to ask you about the NGAD decision. At this point, have you received a debrief from the Air Force and gotten some feedback there?

And how are you thinking about the way forward in terms of potentially protesting the award? Thanks.

Yeah, good morning David. We did get a classified debrief from the US Air Force on their NGAD decision. And we are taking that feedback internally and looking at all the aspects that we were briefed on, which we can't speak to because of the classification level. But we are addressing those. On a strategic basis, where we are going with this decision is not to protest it.

We are not going to protest the NGAD decision of the US government. We are moving forward and moving out on applying all the technologies that we developed for our NGAD bid onto our embedded base of F-thirty five and F-twenty two. I feel that we can have, again, 80% of the capability potentially at 50% of the cost per unit aircraft by taking the F-thirty five chassis and applying numerous advanced technologies, some of which are already in process in Block IV and F-thirty five, but others that we can apply and we are going to offer fairly rapidly to the Department of Defense to really take that chassis and supercharge it for the future. And that's kind of a fifth generation plus concept for F-thirty five. And that investment in NGAD technologies that we made over the last few years are going to be applied directly to that chassis.

And like I said, eventually there'll be 3,500 of those chassis out there at various stages of technology and capability. We think we can get most of the way to sixth gen at half the cost.

The next question comes from Jason Gershky with Citi. Your line is open.

Hey, good morning, everybody. And Evan, welcome to the call. My sentiments as well to you.

if you could just comment a little and maybe reflect on some of the executive orders that have been coming out of the White House since the new administration came to office back January. We've seen quite a bit come out, some of it related to FMS and speeding up the process there. But I think as recently as last week, we've got an executive order that points to the potential rewriting of federal acquisition regulation. And I'm wondering if you guys have some perspective on what the administration is up to here, what they're trying to accomplish, whether this is just strictly reducing red tape and speeding the process up, or if there are going to be some longer term structural consequences for the industrial base and the way that you interact with the building. Thanks.

Yeah, Jason. Not only do we welcome these, we applaud these executive orders and have been advocating for them since I joined from the telecom industry, the management of this company about four or five years ago. So we are involved in advocating and making recommendations along all of these lines. One of the biggest issues where there's limitations on the speed at which digital technology and even the most advanced physical technologies can be introduced into the National Defense Enterprise is the red tape. And so the statutes, regulations, constraints, audits that have evolved through the DoD bureaucracy over decades have never reversed themselves.

This is a chance for those to be really scrutinized and reduced. We will be speeding up not only our FMS opportunities around the world, like what the administration is pressing for here. But we'll be able to get faster acquisition pass for both physical and digital technology. So I think reducing the bureaucratic red tape that's built up in this industry over the past few decades is going to be a boon to our industry. And when I say our industry, mean broadly, right?

And that includes the traditional, as we are sometimes called, aerospace and defense prime contractors. It includes major technology companies such as Verizon and Nvidia and Microsoft that are our partners. It includes midsize and new entrants. We want the best of US industry and technology development applied to the national security space. And we want to be part of that and we applaud all of these changes that are coming down through the executive orders.

The one thing I want to make sure that we get a chance to do is a chance to compete on every dimension. I used to be captain of the Air Force rugby team and all I want to do is get my team on the field and get in the game. I don't care if it's a small contract, a big one, if it sounds like a tech approach or a traditional approach. We can compete on every playing field and we just want to have that level playing field to compete on. So a long way of saying, I'm really encouraged and energized by what the administration is doing here.

The next question comes from Christine Lewald with Morgan Stanley. Your line is open.

Hey, good morning, everyone. And Evan, welcome to the call. Maybe starting off, the tariff situation is fast moving but there's a general sense that defense companies like Lockheed are more insulated than other industrial companies and I guess to the extent that they do exist, what are the underappreciated risks of tariffs in your business And Evan, as a new CFO, what are your priorities as navigate this environment?

Sure, yeah, good morning. Thanks Christine. So from a tariffs perspective, I do agree that we have certain protections in our industry, and after reviewing with each of the four BAs, I feel comfortable we've got an approach to mitigate the impacts, and that's what gave us confidence to reaffirm guidance. I'd say in a lot of cases we're gonna have just direct protection in our supply chain, not in all cases, but in many cases, to avoid tariffs altogether. And then for the vast majority of our external contracts, we've got mechanisms to recover impacts.

So I think for us, we see it less as a function of recovery, although we certainly have work to do there, but it's probably more about timing. And so specifically, is there going to be a lag between incurring a tariff cost and recovering those costs? So we'll, it's gonna stay fluid, but we feel like we've got a good path now and we'll keep updated as that progresses throughout the year.

And just as a reminder, Christine, forty percent of our contracts are cost type, and so what Evan's referring to mainly is the 60% that are fixed price, where we have those contractual clauses both FAR based and specially negotiated that enable that recovery through different equitable adjustment means. So just wanted to make sure I added that as well.

Thanks. Yeah, and to the question on priorities. Yeah, thank you for that. So I plan to lean on prior experiences of this company of moving to high impact roles. And so my number one goal for me, typically, is just to make sure momentum is maintained, right?

We move too fast to allow for any gaps in priorities. And so, make sure there's no slowdown in any initiatives my predecessor was driving. And so you really shouldn't expect to see any near term changes, particularly with our consistent focus on delivering shareholder value. That's just so baked into our culture and is not in question. So as Jim said, fortunately I'm very familiar with our programs and strategies, and I've got well established relationships with the ELC for my career here.

So specifically, I look forward to meeting with stakeholders and spending significant time listening to the priorities of the investment community. And in those meetings, I'll certainly be prepared to answer questions, but I'm also gonna have several of my own to ask. And so definitely look forward to quickly partnering with ELT and my team, move with urgency, and we'll focus on performance, speed and value enhancing growth. Thank you.

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

Yes, thanks and welcome, Evan. Was wondering if you could comment on F-thirty five Lot 19 timing. And also if given there's a lot of international demand for the aircraft, how ready are some foreign customers to take delivery earlier if The U. S. Cuts back the buy?

I'm just wondering like how much of a U. S. Cutback did you absorb and still keep the production rate at around 156? Thank you.

Okay. Right, so thank you. So starting with lot 19, we are looking at the second half of the year for this and that's baked into our guidance.

And then on the international demand Gautam, it's really strong. There's been a number of announcements over the past few months on plus ups to program orders from the international customers. When I was over at the Munich Security Conference, the main topic in the private meetings with each of the defense ministers and prime ministers was how fast can I get my aircraft? So I feel that our aeronautics team feels that if there's some moderation, which we do not expect by the way in US F-thirty five production, that we can make up for that in the international opportunities we have and maintain our 150 plus per year production rate. So we're comfortable that that can be maintained.

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

could you talk a bit more about your opening remarks on Golden Dome? I thought maybe you could discuss funding opportunities, timing and specifically maybe address how you think that might affect the production ramp at MFC, just generally how that might be impacted? Thanks.

Yeah, so it's forming up into sort of three segments, if you will. The government's going to make these policies and define these clearly and specifically, but the way we're viewing it is there's a ground segment which will be radar sensors, command and control systems for existing defensive systems, right, ground based defensive systems. And some of the programs that I already spoke to earlier today, and you're kind of alluding to them as well, are THAAD. We have the NGI contract. All of these are going to be PAC-three, are going to be in higher demand.

And so we will be in excellent position to address those literally right out of the gate. So even on that ground segment, there are ways to network these systems and redeploy them from existing generally army bases or naval bases in The CONUS already. These systems are out there. They're operational. They're ready to be deployed to foreign operations, but we could actually, it's up to the government, again this is policy and not our purview, but we can be supportive in actually fielding those systems from existing bases to population centers or other high value areas where we want to really defend the homeland, so to speak.

And then we can network, and we've shown this, for example PAC-three and THAAD systems and radars. And that's just one example of this interconnectivity that we can create with existing platforms using new digital technology. And that's why five gs and AI and distributed cloud are so important, because we will have to create a web of defenses, a web of layered defenses, even in this ground segment, to start really being effective in Golden Dome. And we can literally do that once the starting gun goes off. The second phase of it will be space based.

And that's another place where, by the way, Lockheed Martin has a lot of existing assets. What we're going to want to help do is network those existing space based assets down to those more tactical systems on the ground so that we have early warning, we've got target tracking on launch in mid course from space so that we can have more accurate fire control over those missile systems in The United States. So the space layer will be complex. Eventually there may be kinetic or non kinetic action from space. That's going to take a little more time to scale.

But that's the second arena. And then thirdly, another place where this sort of twenty first century security strategy will really intersect the third dimension here, is an overarching command and control system, an open architecture standards based where we can have, whether it's Northrop Grumman, Raytheon, Lockheed Martin, other systems, new entrants will be tied into this fabric and really complete the Golden Dome, so to speak, by doing that. May be a little bit further out. But we can do these tactical ground based system deployments very quickly and we can scale production. We've already got investments to do that.

So I think we're in excellent shape for Golden Dome, as I suggested in the prepared remarks. Our strategy was built for something like Golden Dome, and we're out in front of it with our customers. Budgeting, timing, congressional funding, all those kinds of things our government policies that will be implemented on their side, but we are literally ready to go when the starting gun goes off.

If I could just add, given I've got a lot of passion on Golden Dome, haven't worked at MFC, and as Jim said, we just really felt prepared for this. And it was an early sign our customer tends to move rapidly and with purpose. So, just a little bit of stage where it is kind of from the proposal side. The customer issued an RFI, request for information seeking ideas from industry that would inform possible RPs. And so what was remarkable about this one from my perspective, is the RFI had a thirty day turn, which is super fast for something this significant and complicated.

And Lockheed Martin provided, as Jim said, just a series of capabilities, really over a hundred different capabilities through pricing that cross all four BEAs with a focus on cross domain architecture. So clearly not all those RFI responses will turn to requirements. We've given our customers significant amount of go fast ready capability to consider, and we look forward to partnering with customers and suppliers on next steps. As Jim said, thanks.

The next question comes from Pete Skibitski with Alembic. Your line is open.

Hey, good morning guys. Good morning. Jim, one aspect of the new tariff regime, if we go back to that is not necessarily the cost aspect, but I understand China is putting new export controls on rare earth metals. And I don't know necessarily the inventory levels that The U. S.

Or the Lockheed Martin typically has of these commodities. But I know it's been a topic in D. C. In terms of the reliance there for a number of years. So I was just wondering if you could give us your thoughts on just the availability impact that the new tariff regime could have, Because I do understand the rarests are used across a wide variety of defense products.

So I was interested in your thoughts. Thanks.

Yes. First of all, by law, we're constrained from using Chinese inputs of any kind from any source into our products and services and so is our supply chain. So there are alternate sources for our segment of the aerospace industry, I'll call it, which is the defense U. Defense segment. And secondly, there are stockpiles that are available and will be utilized.

This is, I think, a larger issue for non defense industries that require these kinds of materials. Because our supply chain contracts, again, have specified non Chinese sources for the materials over the decades actually. So I think we're in pretty good shape on that. And I would again applaud the US government in seeking to continue to develop US sources for these raw materials all the way through semiconductors, etcetera, that we've been advocating for about four or five years, which is our anti fragility aspect of our strategy, which is we need US sources for even basic materials like titanium, for example, certainly non adversary sources. And we've been pushing for that with the US government and doing it internally for four or five years based on that sort of anti fragility concept of SEEM Taleb.

So I think we're well positioned here to work through these rare earth and other material issues.

And Pete, I would just add to that in terms of our guide for the year. We're pretty confident that a disruption in the material supply for rare earth would not impact our ability to meet our current delivery commitments for the remainder of this calendar year. We have sufficient quantity that's already integrated into our value chain, so it provides a bit of a buffer from potential supply chain disruptions in the near term, and we'll obviously continue to assess as we go on.

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

Good morning. Thank you. On Missiles and Fire Control, you've had some big increases in backlog. You've got $2,000,000,000 nearly a $2,000,000,000 increase this quarter. And so can you talk about what some of the production increase plans you have in your major programs?

And then is this a business that we could foresee having an extended high single digit growth rate over the next few years given that backlog?

Sure thing. Thanks, Doug. Yeah, so you're right. We've definitely seen strong budget demands here of both domestic and international for the MFC products. And so several of the products are ramping currently.

And we talked about earlier the JASSM, LARASM, ORD that gives us a path to ramp to 1,100 in 2027. PAC-three continues to ramp, GMRS. So we're seeing good demand and very strong backlog. And so some of these products will continue to ramp and to Jim's point about Golden Dome, I mean, these are always also areas for opportunity on the IAMD side to be a major part of the Golden Dome architecture. So that could very likely be a source of demand as well.

But the reality is, with these products, we have a lot of confidence that we'll just continue to be in demand all the way across. So, can certainly talk more specifics on individual product lines, but I think across those are the we're going see the real growth with JASS and LARASM, PAC-three and GMLRS ramping.

Yeah, and Doug, it's Jim. So just to complement what Evan's saying here. So we map out for until the end of the decade sort of our high growth product lines. You heard us about some of them. But adding in there, in addition to Gimler's Prism, which is again got the $5,000,000,000 IDIQ order just awarded is in that category.

Fleet ballistic missile actually. So it's sort of a quiet program, but we think it could be double digit growth CAGR over the of the course of the rest of this decade, etcetera. And as you said, JASSM, LARSM is in that kind of category of the high single digit growth over a fairly long period of time to get your specific question. So there's a number of others, NGI is in there too. So the missile systems that the company has developed over again seventy years when it comes to FBM, that is hard to duplicate.

These are the best systems in the world. Again, you go to Munich or Singapore or someplace like that. Customers just readily admit that around the world. Company has some of the best systems in the world. It's got the best and most sophisticated fighter aircraft in production in the world and will for at least the next five years or so.

And does it at scale. And it's the only way we can kind of compete, we meaning the royal we of our allies and us, with China who's building 100 plus J-20s a year and now J-35s on top of that. So our international customers recognize the capabilities of the company, as do our US customers. And again, we're very well positioned for the future here, especially in that missile segment where this stuff is really hard to do, takes decades of experience, is on the edge of known science, and it's not easy to duplicate and just kind of show up at the party and try to compete here. So we're in really good shape in those missile programs.

The next question comes from Scott Duschel with Deutsche Bank. Your line is open.

Good morning. Jim, you spoke earlier about enhancing the F-thirty five with technologies you developed for NGAD. I guess, can you clarify, number one, if that effort would be self funded or customer funded? And then number two, can you walk through what's driving your confidence in integrating those technologies into F-thirty five, particularly given some of the recent challenges with technology insertion? Thank you.

Sure, Scott. So look, this is a baseline. We have 70,000 engineers and scientists in the company working on really interesting stuff all the time. And some of the fifth gen plus solution set is already being funded by the US government and the F-thirty five program itself. There are components, some of which are classified, so I can't really specify them.

But key techniques, I'll say, and approaches that a fighter pilot needs to have to be competitive and win. I'll just kind of talk to those in general, you can be assured that we are investing and the government is investing together in these things. Some of these elements are, again, through the F-thirty five program as it stands today. Some of it was our government funded investment in R and D for NGAD, just the competitive process, was funded for both Lockheed Martin and Boeing over a period of years by the government. And we made independent investments along the way too in both of those programs.

So there's not a clean percentage, but there's co investment between the US government, our allies, and Lockheed Martin in the technologies I'm speaking to. And having done this myself when I was younger, these things are really important. So one is sensing the enemy at a distance greater than they can sense you. And so those kind of categories are radar, they're passive infrared. And passive infrared is really important because if I'm transmitting radar, that means somebody else's electronic warfare receiver can see me.

And then they can maybe shoot me. So the better I have infrared, which is passive, we can sense that, and the best radar on top of that. Those kinds of sensors are really, really critical because I explained this in a meeting with the White House. President's like, dogfights are not what we want anymore in air to air combat. We want to shoot the other guys, as I said before, he even knows we're there.

And you do that, first of all, with the critical sensors to find them. Then you make sure they can't find you. And that's the stealth technology. And there's some techniques that we've used for our NGAT offering that can be applied, whether they're materials, they're geometries, they're countermeasures for stealth. So no, I can't be seen.

That's the first part of the equation. The second part of the equation is you want to have a tracking system and a weapon that can go farther and hit the enemy plane before they can ever even reach you with their weapon. And so there are techniques and capabilities we delivered with NGAT, our NGAT bid that were developed for that, that we can now apply here. So it's an F-thirty five. So we're basically going take the chassis and turn it into a Ferrari.

It's like a NASCAR upgrade, so to speak, where we could take the F-thirty five, apply some of those co funded technologies both from NGAD and the F-thirty five program, and you're going to have, again, my challenge to my aeronautics team is let's get 80% of sixth gen capability at half the price. That's something that these are engineers, they wouldn't have agreed to this if they didn't think there was a path to get there. That's something we're going go out and do. And this is this best value approach that we've been kind of working our way towards that at Lockheed Martin over the last four or five years. How do we get best value to the customer who has a limited budget and an increasing threat?

We use these digital technologies. We apply something from one system or one BA to another, and we actually try to create that best value equation. It's a little kind of not uncomfortable, but novel for our industry to think that way. But we are thinking that way. And value is important and maybe as or more important than the highest technology available.

Lockheed Martin (LMT) Q1 2025 Earnings Call Transcript

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