Lockheed Martin Corporation (LMT)

“our commitment to invest a total of between $8 billion to $9 billion of capital in munition scaling is unchanged.”

“We feel really confident that the $156 per year production rate will be sustained for quite some time.”

“On a year-over-year basis, every segment will grow faster in the second half of 2026, continuing the acceleration we posted in Q2.”

“At RMS, the new radar awards Jim and Evan mentioned give us confidence to increase the full year sales outlook to between $17.7 million and $18.1 billion.”

“We're also confident that stronger working capital dynamics will improve our cash conversion cycles.”

“Every segment at Lockemord will grow faster in the back half of 2026 on both the top and bottom lines.”

“Consequently, we are raising our 2026 guidance, reflecting our confidence that our strategy is gaining momentum, and we will continue to produce sustained profitable growth over the next few years.”

“So we would still think about near-term dilution in the 20 to 30 basis points over the next few years with a goal to get to higher than historic margins on. So for next year, I think, generally speaking, this year is a good reflection within 20 to 30 basis points.”

“I think what you're seeing this year is what we should generally expect to see in the future, which is MFC margins in kind of the high 13s, low 14s, which is what we've managed to do when we're really hitting our ramps and hitting our marks, which we've been doing here pretty consistently on the MFC side.”

“while there could be some near-term dilution, I think long term, we would expect this to match our traditionally very strong margins in MFC with a goal to increase versus historical margins in MFC.”

“We expect it to be consistent with our historic munitions production margins.”

“we're attending in the second half of the year to also get a multiyear on PAC-3.”

“At this updated outlook level, the mid-single-digit year-over-year sales growth that space posted in the first half will step up to the high single digits in the back half.”

“The space full year profit outlook was lowered to between $1.34 billion and $1.38 billion due to reduced ULA equity earnings because of the ongoing technical investigation of the Vulcan launch anomaly experienced earlier this year.”

“We now anticipate 2026 sales of between $13.85 billion and $14.05 billion supported by key wins on the next-generation interceptor, fleet ballistic missile and several classified national security programs.”

“Our updated full year outlook indicates RMS will accelerate to a mid-single-digit year-over-year growth rate in the second half, driven by the higher radar volumes and continued production ramps at Sikorsky.”

“The profit outlook at RMS is also raised and is now between $1.86 billion and $1.89 billion, keeping margins steady relative to the prior outlook.”

“And at this updated outlook level, the second half 2026 growth rate will be even faster.”

“the profit range is now $2.3 billion to $2.35 billion, reflecting continued mid-teens margin performance.”

“MSC's sales range has been adjusted to $16.5 billion to $16.9 billion, lifting the low end of our prior guidance.”

“Our updated outlook accelerates Arrow's growth rate to the mid-single digits for the second half of this year.”

“Margins are pegged modestly lower than our prior guidance as we scale up new contracts in F-35 production expand sustainment work and absorb the F-16 and C-130 challenges we realized in Q1.”

“The higher sales volume pushes the profit outlook up to between $3 billion and $3.08 billion.”

“We now project Arrow to deliver full year 2026 sales of $31.7 million to $32.7 billion, driven by strong F-35 production and sustainment volumes.”

“We are also updating our capital expenditure guidance to a range of $2 billion to $2.4 billion reflecting efficiencies realized in MFC's munitions buildout.”

“Earnings per share is now projected at $29.95 and to $30.65, driven by higher year-to-date profits and a lower effective tax rate.”

“Our free cash flow outlook is increasing too. As I began to signal last quarter, we now expect a range of $7 billion to $7.2 billion.”

“Our revised outlook pegs our second half 2026 growth rate in the high single digits and perhaps even the low double digits, a year-over-year increase of between 7% and 12% as compared to the second half of 2025.”

“Correspondingly, we are increasing our segment operating profit target to now $8.5 billion to $8.7 billion.”

“Turning to Slide 4. I'm pleased to report that we are raising our outlook across every key metric. Building on the momentum we generated in Q2, we now expect total sales of $79.75 billion to $ 81.75 billion, representing an 8% year-over-year increase at the midpoint, up from the prior 5% guidance.”

“The U.S. Space Force selected us as one of the awardees to develop space-based interceptor prototypes under golden done with capability demonstration expected by 2028.”

“The top end of Arrow's updated sales range implies an even stronger second half growth rate could be realized driven by a bump in sales that is dependent on timing of award for the next lot of F-35 production.”

“the goal is to sort of have a ratable increase from our current levels of production, which is last year 650 Patriot missiles per year up to 2,000. And that's going to take 3 to 4 years depending on supply chain and other considerations, but we really do think we can get it done in 3 to 4 years.”

“that gives us additional confidence to hit the top end of our range this year.”

“F-35 continues to make progress as we progress on deliveries, we'll have more opportunities for cash liquidations. I think as you look throughout the year and the pace of our deliveries and program milestones, we're going to continue to see cash increase throughout the year, it's going to be back-end loaded, not unlike previous years, but I think we've demonstrated our ability to close the year strong and hit our cash flow guide.”

“we'll get that extra time back in 4Q, just so we're all tracking to the same calendar there.”

“With respect to the cash burn on our classified programs, I'd still think of that as kind of the $500 million to $700-ish million a year for this year and next year, and then we expect to see a pretty sizable drawdown on that cash draw depending on how that goes.”

“we expect to see successive sales and margin growth throughout the year with strength to get to our total year guidance.”

“Our free cash flow guide continues to assume between $2.5 billion and $2.8 billion of capital expenditures in support of production ramps and key strategic growth opportunities.”

“profit of $8.4 billion to $8.7 billion”

“Our 2026 financial outlook remains consistent with the expectations we shared in January including mid-single-digit sales growth, profit of $8.4 billion to $8.7 billion and free cash flow range of $6.5 billion to $6.8 billion.”

“Our full year cash guidance remains, and as in past years, higher cash flow is projected to be weighted towards the latter half of the year.”

“The C-130 deliveries have resumed with 4 aircraft delivered as of today, keeping us on track for our full year targets.”

“First quarter 2026 sales were impacted due to the shortened fiscal period compared to the prior year, we expect sales to grow in the second quarter and throughout the remainder of the year, supporting our full year growth outlook.”

“We do think we have a path through the flight test and other parts of this program. that have sufficient coverage, I'll call it, in our financials right now to hopefully not experience any additional write-downs of the program.”

“We expect investment will continue to be elevated going forward to meet customer demand for our munitions, and the acceleration of production for these programs provides line of sight to a compound annual growth rate for MFC sales of at least double-digit through the end of the decade.”

“We've also committed to an additional $1 billion of strategic internal investment for the F-35, with an emphasis on the aircraft sustainment system to improve mission-capable rates across the fleet.”

“In the next couple of years, we still have some dilutive pressure of some of the programs that we took prior losses on. So as those sort of work down, there's gonna be, I believe, increased margin opportunity in the out years.”

“That requirement does come back in starting in 2027, of at least a billion dollars depending on how we look in terms of pension performance this year.”

“We've already announced that we're building an operable space-based interceptor that we wanna fly in space by 2028 that would be part of Golden Dome potentially”

“And that margin pressure because of the start-up nature of this production ramping will be in an environment where sales should be double-digit growth in MFC and maybe even mid-teens sales growth in MFC?”

“But that's gonna then create over time an opportunity to exceed MFC margins beyond where they have historically been with the opportunity to perform that is presented to us with these multiyear agreements.”

“What that would mean for MFC margins in the coming years is some possible dilution, but probably no more than 20 to 30 basis points at max.”

“We expect both of those programs to be up and running under the framework agreement with appropriations by, you know, by this year, 2026, that's our expectation.”

“Consistent with prior years, I expect the majority of our cash to come in the second half of the year.”

“Space margins at the midpoint are slightly above 10% and include higher equity earnings related to ULA.”

“Finally, space is projected to grow approximately 5% year-over-year at the midpoint, with strong growth expected on fleet ballistic missile, NGI, and hypersonic programs within the strategic and missile defense systems portion of the business, as well as solid growth from space tracking communication missions due to the Space Development Agency's transport and tracking layer programs.”

“RMS margins at 10.5% at the midpoint include impacts due to portfolio mix and program life cycles.”

“Aero margins of 9.8% at the midpoint reflect the dilutive nature of the growth in Skunk Works and from F-35 sustainment.”

“We expect deliveries to be in line with the production rate this year.”

“F-35 production will see a slight lift due to lot mix and pricing, with the production rate holding steady at 156 aircraft per year.”

“We expect low single-digit overall growth in 2026, with Skunk Works and F-35 sustainment leading the way, each with potential for double-digit growth year-over-year.”

“Further, we intend to make a multibillion-dollar investment to accelerate munition production over the next three years, including building facilities across five states, such as in Camden, Arkansas, with a brand new munitions acceleration center facility breaking ground today.”

“As the first implementation of such a long-term multiyear agreement, the PAC-3 MSC will increase annual production capacity from approximately 600 to 2,000 per year.”

“with the year-over-year reported segment operating profit growth to be more than 25%.”

“If we could drive free cash flow to such a way again this year, there may be an opportunity to pre-fund 2027's required pension as well.”

“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.”

“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.”

“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 lower estimated full-year tax rate.”

“Meanwhile, RMS is lowering its forecast for sales by $500 million due to lower expected cost volume and slower production ramps at Sikorsky.”

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

“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%.”

“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.”

“Our top priorities are delivering out this year with a guidance of more like 1.75 to 1.9 and a big focus on completing Block IV development.”

“Now estimated to be approximately 16.7%.”

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

“We now expect between 175 and 190 deliveries in 2025.”

“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.”

“Those programs still we expect that the normal margins we would see 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 confidence in MFC overall performance.”

“And so given, presuming that the strong advocacy we've seen from lawmakers and the focus on their superiority from the administration, that gives us confidence in maintaining the 156 a year rate.”

“So therefore, we believe we've got some margin opportunity in lot 19 relative to prior lots.”

“So the implied margin 4Q, I would not use as necessarily a guide for ongoing into next year. Just happens to be a particularly low quarter from a risk retirement standpoint overall.”

“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.”

“So the way to think about it is starting in 2027, we expect pension cash contribution be neutral to free cash flow as pension recoveries and pension contributions should be equal on an annual basis.”

“So fourth quarter needs to continue to be a scaling quarter for us. And then next year for sure across both programs.”

“And we're actually planning for a real on-orbit space-based interceptor demonstration by 2028.”

“However, our intention is to offset any of that headwind in 2027 with growth in operational cash.”

“With respect to cash, absolutely, we expect to see a very strong cash second half of the year led by F-thirty five getting the Lot eighteen and nineteen award under contract will be a significant cash liquidation event”

“we expect to end the year with a new backlog record with just very strong orders to come.”

“I'm confident that the F-35 production rate will stay strong.”

“we remain committed to returning at least $6 billion per year to shareholders through our reliable dividend and share repurchase program.”

“we are maintaining our previously provided range of $6.6 to $6.8 billion for free cash flow in 2025.”

“we have line of sight to increase backlog in 2025 with a handful of significant awards expected in the second half of the year.”

“we are reaffirming our sales guidance of $73.75 billion to $74.75 billion.”

“We also remain on track for 170 to 190 deliveries this year 2025.”

“As of today, we're assuming a usage of $500 million of cash tied to the Aero classified program this year, which is baked inside of our cash guidance that we're reiterating at 6.6 to 6.8.”

“the administration's legislation is anticipated to provide approximately $400 million to $600 million in cash tax benefits, primarily related to R&D capitalization.”

“We've lowered our earnings per share estimate to a range of $21.70 to $22, incorporating the impacts from the charges impairments, and tax reserve.”

“Segment operating profit is now expected to be in the range of $6.6 billion to $6.7 billion with an implied midpoint margin of 9%, reflecting the $1.6 billion of program charges.”

“we anticipate the F-35 lot 1819 award in Q3 will liquidate a significant balance from contract assets.”

“there is some upside in the future. Because those margins were affected by some of these one-time write-offs. Although there were some plus ups, the write-offs obviously were were way higher. So there could be upside.”

“Previously, we discussed a baseline case of low single-digit absolute free cash flow growth through 2027 with an upside case of mid-single-digit growth being possible if we could unlock working capital improvements and offset the multiyear pension headwinds.”

“for the vast majority of our external contracts, we've got mechanisms to recover impacts.”

“the strong profit we realized in the first quarter provides increased confidence in our ability to absorb currently estimated 2025 profit impacts from tariffs and the ENGAT announcement.”

“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.”

“So starting with Lot 19, we are looking at the second half of the year for this. And that's baked into our guidance.”

“Third, our guide accommodates the direct program impacts of the ENGAT announcement on 2025 quarter sales, profit, and cash flow.”

“Second, the outlook assumes a certain level of tariff impact as we expect to mitigate potential cost increases and offset cash timing pressures.”

“First, on F-35, 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 360 jets at the end of Q1.”

“we're optimistic about achieving our profit targets for the year and look forward to partnering with Frank and the rest of the leadership team on operational excellence initiatives to unlock company-wide efficiencies.”

“Our expectations for Lockheed Martin's 2025 financial outlook remain unchanged from what we laid out in January, with the strong first quarter results positioning us well to achieve a consolidated full-year outlook of mid-single-digit sales growth, solid 11% margins, and high single-digit free cash flow growth of $6.7 billion at the midpoint.”

“Looking beyond our strong 2025 guide, the current backdrop supports sustained backlog strength with improved U.S. and international budget opportunities. This provides a line of sight to stronger sales growth rates through 2027 than previously expected.”

“yeah, I do think we see a path to, you know, a little bit better than we laid out prior, at least at the lower end of the low single-digit growth.”

“JASM, LRASM is in that category of high single-digit growth over a fairly long period of time”

“so we're seeing good demand and very strong backlog. And so some of these products will continue to ramp”

“return at least $18 billion to shareholders via dividends and repurchases”

“Namely to invest over $10 billion in R&D and capital expenditures, and return at least $18 billion to shareholders via dividends and repurchases, all while continuing to fund required pension contributions.”

“Yes, it's really not dependent on additional supplementals. I mean a lot of this is a lot of the capacity is going to be committed and or contracted with our customer.”

“We are driving towards 14,000 on GMLRs. We've been driving, as Jim has mentioned in the past, to 4,000 on Javelin, 96 on HIMARS.”

“But as you know, we're also focused on making sure that we can accelerate the speed of our throughput and drive that backlog conversion faster.”

“So for F-35, we do have. I'm sorry, for Aeronautics in total right now, the outlook for their margins does assume lower net profit adjustments, and that's called an apples to apples basis.”

“We do expect a benefit from taxes with lower R&D capitalization as that's coming down, and we expect a little bit of benefit from, I'll call it cash based net income.”

“As we mentioned that we expected anywhere around close to a billion dollars of benefit on F-35 with the delivery of -- with higher deliveries as well as progress on the withholds.”

“For our outlook in 2025, what's implied in there is about one day which essentially offsets the growth that we're going to see from we would otherwise see in working capital.”

“As previously discussed, operating margins returned to 11% and free cash flow grows 9% at the midpoint from 2024 to adjusted results, setting up double digit growth in free cash flow per share in spite of non-cash FAS pension headwind lowering EPS.”

“Yes, just starting with the Aero classified program. That will be certainly a cash flow drag over the next few years.”

“What I can tell you is outside of the fixed pricing related to this next phase, that the pricing would be open and we would expect to return to reasonable type margins over that period of time outside of where we have the fixed committed pricing.”

“We expect that will continue throughout the year. We expect to meet some milestones this year. We're targeting as much as possible this year. But I think for purposes of financial modeling, we would expect, this to bleed into 2026.”

“So I would expect in the years to come that we still have opportunity to continue to drive asset productivity there and that's going to be part of our formula going forward, as it was in 2024 and our outlook for 2025.”

“We'll be able to give you a clearer, a clearer view longer term. But at the moment we're encouraged by what we're seeing and surely we've seen it here in 2025 and we're starting to gain confidence, as I mentioned before, that it can continue in 2026.”

“If we continue to see though what we have seen, then sure, I would feel a lot more confident in a multiyear outlook that is more in its 4% to 5% range like we're guiding for, for 2025.”

“I remain confident that we'll be able to do that through the combination of organic working capital reduction as well as some level of inorganic mostly on the debt side.”

“As you go to 2025, will deliver more aircraft. And so we will see the benefit of having delivered more aircraft and we will also see the benefit of having incremental withholds released. I would quantify that today at around $300 million to $400 million.”

“A baseline assumption would be that we -- you go from $325 million to anywhere between say $250 million to $300 million in losses in 2025, assuming a one per year type of framework.”

“The other one would be in our -- really our classified portfolio, and those are campaigns that will happen over the next, I would say, six to 18 months.”

“And third, this outlook does not assume any pension contribution in 2024.”

“The second key assumption is that we continue to anticipate $325 million of full-year losses on the MFC classified program.”

“First, we expect F-35 Lot 18-19 to be awarded this year, maintaining program funding and continuity.”

“And lastly, on free cash flow. We now estimate approximately $6.2 billion for the year, up slightly from the prior midpoint while absorbing the unfavorable impact of the recent F-35 Lot 15 to 17 aircraft delivery settlement, which we estimate will be approximately $600 million in 2024 with expected recovery over the next few years.”

“We're increasing our forecast by $0.30 from the prior midpoint to approximately $26.65.”

“We're also increasing the segment operating profit expectation driven by the higher sales volume to approximately $7.475 billion, and we continue to anticipate consolidated segment operating profit margins of approximately 10.5%.”

“We estimate sales of approximately $71.25 billion, reflecting growth of 5% over 2023 as our backlog continues to convert across the portfolio.”

“All told, we still expect to return greater than 100% of free cash flow to shareholders in 2024 via repurchases and dividends.”

“We have slightly reduced our share repurchase target for the year to approximately $3.7 billion, primarily due to the redeployment of capital to the Terran Orbital acquisition.”

“With one quarter remaining, we've shifted to approximate point estimates that reflect increased expectations for sales, segment operating profit, earnings per share and free cash flow.”

“We expect to deliver 90 to 110 aircraft in 2024 and the remaining balance of the Lot 15 to 17 aircraft thereafter.”

“The leader of growth will be MFC over this time period through 2027. And I would put them at the high-single-digit clip very comfortably based on the backlog that they have today and the visibility we have to incremental orders.”

“So in summary, on Chart 11. Performance year-to-date gives us confidence to raise the full-year outlook for 2024 and in our ability to deliver solid sales and free cash flow growth over the next few years.”

“We have confidence that we could fully offset the headwinds and improve the growth rate to mid-single-digits through the combination of organic and inorganic cash generation initiatives.”

“Well, Rob, the way I would characterize it is just quick math, one day equates to about $200 million of free cash flow. And I would say through '25 and '26, we would have to do at least two days of working capital improvement.”

“This is important to point out that, that remains consistent with the low single-digit free cash flow growth framework that we've articulated today and previously.”

“As Jim mentioned, what we're looking at here is an output estimate of about 180 aircraft deliveries per year over the next three plus years.”

“We will be able to deliver a mix of aircraft above the 156 production rate for the next few years because we'll be mixing based on what the customer is looking for.”

“The other three business areas in this framework, at least starting off with this low-single-digit, the rest of them will be in this low-single-digit framework pretty kind of consistently.”

“We still expect single digit – low-single-digit free cash flow growth over the next three years, supplemented by share repurchases to deliver mid-single-digit free cash flow per share return over the same horizon with upside potential.”

“For free cash flow, we continue to target a low single-digit CAGR through 2027, based on delivering cumulative working capital reductions that partially offset known pension contribution headwinds.”

“So in other words, steady improvement to a more normal range of around 11% ROS by 2027.”

“On segment margins, we anticipate improvement of 10 to 20 basis points per year based on our continued focus on operational excellence and program performance, combined with program derisking.”

“Looking at sales through the 2027 time line, our baseline assumption still reflects a low-single-digit compound annual growth rate off of the higher-than-expected sales expectation for 2024.”

“For example, by the 2030s, over 600 F-35s will be in operation across more than 10 European nations.”

“Should the negotiation time line extend beyond year-end, the financial impact would be one of timing. We could see about 3% or $2 billion of our sales shift into 2025 along with associated impacts to profit and about $1 billion of free cash flow.”

“We have to do a few test articles next year in 2025. There'll be further testing that's done by the services to get their certification, the military services in 2026 and should be producing at rate we hope by 2027.”

“As I stated previously, the demand signals point to mid-single-digit growth through 2027, but the outlook remains tempered by our current assessment of the pace at which the value chain can meet the demand.”

“Our strong performance so far in 2024 extends beyond blast backlog as well giving us confidence to raise our 2024 full year outlook for sales, segment operating profit and EPS.”

“On the PAC-3 specifically, we expect to get to $550 million in 2025, and then to $650 million by 2027.”

“So when you bring all these things together, we think that they generate a path to overcome what we're seeing in the pension and drive us to this target of low single digit.”

“So we'll get in the range, I'd say, about $150 million of benefit just through lower payments there.”

“On CAS recovery, this year, we're a little bit under, say, $1.7 billion. We expect that to step down by -- in the range of about $100 million and probably stay at that level for the next few years after that.”

“In the second half, we expect about another $225 million.”

“So we're actually implementing those kinds of things on a standard base architecture into our products and services today, which I expect will continue to pull them through.”

“We expect -- our continue -- as I mentioned in my prepared remarks, that we continue to expect the backlog to increase at end of this year, which gives us more visibility into further growth in 2025 and beyond.”

“I think given the fact that we're at a higher level in 2024 is a positive, and we continue to expect to grow in 2025 off this higher baseline.”

“We've said over the last few months and really the last year or so that our goal has been to increase absolute free cash flow in the low single-digit clip, and then that augmented with share repurchase would get us to a mid-single-digit free cash flow per share expectation. That remains of the outlook.”

“So we just hold the production. We'll expect F-35 to grow mostly from sustainment next year and in the years to come.”

“We're targeting anywhere between 12 to 18 months to fully deliver on these parked aircraft.”

“As far as the future, from terms of reducing on the backlog of aircraft, our target is anywhere between 12 to 18 aircraft deliveries per month and really to burn down the aircraft backlog.”

“Yes. Let me just add, just to reiterate, Kristine, we expect anywhere between 75 to 110.”

“Second, we continue to expect $325 million of losses on the MFC classified program, of which $100 million has been recognized year-to-date.”

“First, we expect F-35 18/19 to be awarded this year, maintaining program funding and continuity.”

“Lastly, on backlog, we continue to expect backlog to grow in 2024 even with the higher sales outlook, which provides a line of sight to future growth.”

“On the cash deployment side, we still expect over $3 billion of IR&D and capital investments, while the dividend, along with the expected $4 billion of share repurchases, maintain attractive shareholder returns.”

“We're holding our free cash flow expectation in the range of $6 billion to $6.3 billion, which absorbs a potential unfavorable impact from longer deferrals of final F-35 delivery payments.”

“We're also increasing segment operating profit expectation based on the higher sales with the new range of $7.35 billion to $7.5 billion and anticipate consolidated segment operating profit margins to remain at 10.5%.”

“We continue to produce at a rate of 156 aircraft per year and expect to deliver 75 to 100 aircraft in the second half of 2024.”

“We've talked about 2024 being a low watermark for all net-net margins, and we expect it to improve gradually over the next few years, and we still feel confident that can take place.”

“And again, they're going to be a significant source of growth for Lockheed Martin or for the next three to five years.”

“We see continued growth there next year, and they're going to be, again, the highest grower within Lockheed Martin for the next three to five years.”

“We've talked JASSM and LRASM going from about 700 a year to 1,100 a year, so all of these orders that we're seeing, all these customer engagements that we have both domestic and international are all enablers to drive to these rates that we're building to.”

“We've talked about Javelin going from 2000 to about 4,000.”

“We've talked about GMLRS going from 10,000 to 14,000.”

“and then to $650 million by 2027.”

“In addition, we expect deliveries of F-35 aircraft to exceed production for the next few years.”

“We talked about growth in -- starting in 2023, a year earlier than we had originally anticipated, accelerating in 2024, and then giving us more confidence that we'll see at least a same if not more growth in 2025.”

“These first quarter results reinforce our confidence in our ability to achieve the full year financial expectations we shared in the most recent earnings call.”

“And their underlying performance has been solid and we expect that to continue.”

“But I think over the longer-term and the medium-term, I think we're working in coordination with our customer to make sure that we can deliver the capabilities the customer wants, but on an executable schedule. And if we're able to do that, then we should be able to keep the program on track from a production standpoint.”

“As Jim mentioned, in 2025, we'll have further capability inserted and we'll actually start delivering on the inserting Block 4 type of capability as well.”

“And so what our guide, what it implies from where we are today, we reported $100 million is in a range of another $225 million in the back half of the year, which would be provided for in this expectation.”

“Just as a reminder, we're anticipating, and that was fully anticipated in our guidance for MFC, that we would have additional or could have additional losses in the back half of the year associated with this classified program.”

“We continue to expect free cash flow to be in the range of $6 billion to $6.3 billion, including over $3 billion of independent research and development and capital investments.”

“Over the next 18 months, we'll integrate our latest sensor open system architecture technology with Intel semiconductors with the intent to ultimately implement, test and complete production through the U.S. Navy's Lockheed Martin MH-60 Romeo helicopter program.”

“While there were no final deliveries of F-35 jets in the first quarter, we're maintaining our production rate and continue to expect an aircraft delivery range for 2024 between 75 and 110, which requires timely receipt of the necessary hardware from TR-3 suppliers along the way.”

“The test results to-date support our expected timeline of delivering the first TR-3 combat training capable aircraft in the third quarter and then transition to a fully combat capable aircraft in 2025.”

“And I think right now, our outlook would say probably in -- if you're -- probably 2028 is where we would expect that to flip to positive.”

“As I mentioned, from a revenue standpoint over the next five years, it will actually go up over the next few years a little bit, come back down, but pretty much flat to where it is today. And so stability, I think, is the best way to describe it.”

“While we will see declines in other programs such as combat rescue helicopter, some declines on Black Hawk and others, the CH-53K will really offset all of those declines.”

“As Jim mentioned. A stable outlook is the best way to describe it. As Jim mentioned, CH-53K is really the pillar. And those revenues between now and 2027 and 2028 are going to double.”

“You'll see coming out in our 10-Q that we've actually ranged the potential losses on this program, which would be in excess, additional losses in excess of $1 billion.”

“While the dividend, along with the expected $4 billion of share repurchases, support our returns to shareholders, targeting a mid-single-digit free cash flow per share growth over the longer-term.”

“And so when you look at it in the short-term, could there be pressure on the last 15 through 17 contract profitability and potential movement around in cash flow? Yes.”

“Now, it's possible that we could record additional losses here in 2024 depending on other factors as the year goes on, there's factors such as technical milestone achievement through the balance of the year, discussions with our customers, visibility to funding.”

“So we're well-positioned to deliver on that expectation. It is possible somewhere to last year that we could see some upside towards the higher end of the sales guide range there.”

“And so those three together will help us drive to a better result in the future and give us confidence that we'll be able to expand margins even with these headwinds.”

“And so we are taking the shareholders' interest into account and all the things we talked about, which should help improve our margins, even though it may result in some difficult discussions with some of the customer base.”

“We delivered five aircrafts in 2023. We would expect that to triple potentially quadruple here in 2024.”

“On the F-35, I mean, I think the way you've talked about it Seth is right, anywhere between 100 to 120 aircraft is in terms of undelivered -- against the 156 type of expected delivery rate is the right way to think about it, yes.”

“Our net FAS/CAS pension adjustment declines around $400 million from last year to a little less than $1.7 billion for 2024 due primarily to lower FAS pension income.”

“We expect these demand trends to endure and drive requirements to closely match with Lockheed Martin's advanced technology and systems integration capabilities.”

“we anticipate the first flight of RAIDER X in late 2024.”

“The X59 was unveiled at a rollout ceremony earlier this month and is expected to take first flight later this year.”

“And we do have a line of sight and a path to get overall back to 11%, including the absorption of these losses on the MFC classified program, but it's going to be a gradual march back up.”

“Here, as we fully deliver those out and deliver on the subsequent contracts, we will see profitability improve on the F-16 over the next few years.”

“So we'll start seeing a more significant spike in PAC-3 activity and deliveries over the next few years here as we get to 550 by 2025, and then ultimately 650 by 2027.”

“you would expect, tactical and strike missiles. So the guided weapons, the HIMARS, JASSM, LRASM, all those will continue towards their march through these ramps by 2025 and in certain cases, 2026 and 2027.”

“The first group of nine satellites is expected to launch in April of 2027.”

“And in terms of potential upside, what I would point you to is that if we're able to unlock and see a little bit better performance and that what drives to the high end of our sales profit and EPS range.”

“That becomes more difficult if the process extends beyond March.”

“the second planned mission could happen as soon as April.”

“We've been targeting mid-single-digit free cash flow per share growth. And we still see a path there.”

“I wouldn't view that higher pension contributions as limiting, otherwise limiting our ability to continue our cash deployment strategies, and that's the key point.”

“So we might see some short-term limitations on our ability to take profit rate adjustments, we still expect and have confidence will drive higher profitability on this contract lot than the prior one.”

“We're also set to deliver mid-single-digit free cash flow per share growth in 2023, and we're positioning the company to continue that level of growth in the future.”

“We are also reaffirming our full year 2023 financial outlook for sales, profit, EPS and free cash flow.”

“Just as I mentioned, underlying margins, and let me for sake of clarity, margins, excluding the impact of the MFC program, we expect to be flattish. The MFC programs, it will provide a drag on the margins next year, and it's a question of timing. So it could be anywhere between 25 to 50 basis points.”

“On the cash side of it, we'll see a little bit of a slight reduction anywhere between $25 million to $50 million reduction.”

“FAS pension will see a significant reduction next year. We're going to go from about $375 million of income in '23 to about $50 million of loss in 2024.”

“We expect that to grow for the year around 10%.”

“We're evaluating what that means for 2024 in general. But again, I think, as I mentioned in my prepared remarks, we're expecting the underlying business to be pretty much flattish, which would include recurring margins as well as profit rate adjustments in 2024.”

“What we could find ourselves in a situation is that we're recording multiple lots in 2024, which would put some downward pressure on next year's margins. So we'll have a better feel for that next year, and it could be in the range of anywhere between 25 to 50 basis points of headwind from where we are and where we end today or this year from a margin perspective.”

“And at free cash flow, we're following the budget process to determine whether it will have an impact on the timing of our program schedules and milestones but are continuing to set internal targets that deliver mid-single-digit growth and free cash flow per share.”

“On segment margins, we expect the underlying business to be relatively flat year-over-year, but anticipate variability caused by the timing of impacts from the MFC classified program.”

“We still anticipate low single-digit sales growth as we convert our strong backlog position.”

“These repurchases along with dividends, are expected to return nearly 150% of our free cash flow to shareholders for the year.”

“In conjunction with our recent announcement of increased share repurchase authorization, we're increasing our share repurchase forecast for 2023 to $6 billion, provided there is not an extended shutdown scenario.”

“Another longstanding major Lockheed Martin program, this one is space is also poised for significant growth ramp.”

“In our RMS business, Sikorsky CH-53K helicopter is expected to grow meaningfully also over the coming years.”

“As previously announced, we continue to expect to deliver the first TR3 configured aircraft between April and June of 2024.”

“We are producing F-35s at a rate of 156 per year, and expect to continue at that pace while simultaneously working to finalize TR3 software development testing.”

“Consistent with our announcement in September, we continue to expect to deliver a total of 97 aircraft this year, all in the Technology Refresh 2 or TR2 configuration.”

“We've talked about orders between 2023 and 2027 of $10 billion. We have not seen all of those orders come to fruition yet. So we would expect those to be continued opportunities for us.”

“So over time, over the next few years, it will revert back to more of a 100% of free cash flow.”

“If you look at just the profile with this incremental authorization that we have, the way we're looking at it is $6 billion here in 2023, $4 billion in 2024 and then essentially $3 billion in '25 and $3 billion in '26, which puts us equal to free cash flow in that ballpark, assuming kind of a $6 billion placeholder offer free cash flow in those given years.”

“If we do find ourselves in a shutdown scenario, would cause us to take a pause in another relook at that share repurchase. And what we would probably do is just defer it, so it would be more of an issue of timing versus anything else until such time that the budget gets clarified.”

“We’ve seen some lower attrition rates, as well as better hiring rates as well. And so we’re fairly confident that that will stick and that also bodes well for the rest of the industry, particularly supply chain.”

“Yes, on CapEx, I would definitely expect it to increase in the back half of the year. We’re still holding our forecast of $1.95 billion for the year.”

“Many of those benefits that we’re going to obtain, we will pass those through in pricing and our forward pricing rates to our customer. And so we won’t necessarily see some more our margin benefit from it.”

“So I wouldn’t expect there to be any type of margin upside from where we are today. So I would expect consistent margins from those.”

“Our goal over this period of time is to continue to deliver a low single digit free cash flow growth on an absolute basis. And that combined with our share repurchase program, should result in a mid-single digit free cash flow per share growth.”

“We will see the back half of the year organically declined, relative to the from a year-over-year perspective, but again, still putting us in a position to deliver growth a year earlier than we expected.”

“We think no, the outlays will continue to increase it is just a function of us, we always have a back half is still higher than the first half.”

“We believe there’s efficiency opportunities to perform at levels we’ve been able to perform in the past and make that at a minimum, not a use of cash. And if we’re fully successful, make it a source of cash in spite of growth.”

“As far as the margin profile at MFC, we do expect there to be continued pressure over the next number of years.”

“And while we expect there to be some pressure on cash collections we are driving offset opportunities to make up any shortfalls.”

“As expected, we expect minimal impact to our cost throughput in 2023 as a result of the lower F-35 aircraft deliveries.”

“Lastly, we’re maintaining our free cash flow guidance at or above $6.2 billion and remained committed to $4 billion of share repurchases with $2.7 billion in the back half of the year.”

“Production is expected to start with our new German partner in 2025.”

“Our team remains fully dedicated to delivering the first TR3 aircraft in 2023.”

“That will be our second highest grow or anywhere between mid to high single digit growth through 2027.”

“MFC should be significantly better than that. And we would expect them to be our highest growth segment.”

“And we’re going to that’s going to essentially stay elevated for the next few years.”

“Our latest estimate is that’ll all be completed by the end of the fourth quarter this year. Could it move a little bit into early 2024? Yes, it could.”

“We remain on track to meet our financial expectations for the full-year and the return to growth in 2024 as we laid out in January.”

“But effectively, a one book-to-bill sets us up for the growth to resume in 2024.”

“For the full-year, we're expecting that to be closer to 30% for profit adjustments for the full-year for RMS.”

“We've got a guide of nearly 12% for the year.”

“So, there's a wide and broad range across all of our business areas, a significant international demand that we'll be seeing over the next few years.”

“Today, it's about a $1.5 billion business for us in the aggregate, all of those programs that Jim mentioned. We expect that to continue to grow and be a contributor.”

“It'll step up, it'll probably peak out in 2025 and then stabilize from there.”

“So I would expect in a step-down in the 13% range in Q2, it will cycle down from there, we're still expecting the full-year to be in this 13.5% range really due to these two items.”

“So, essentially more of the same in the first quarter from what we saw previously.”

“And our adoption of 1LMX model-based and digital thread enhancements significantly improved our cost competitiveness and we expect that to continue in the future.”

“We also still expect to deliver free cash flow at or above $6.2 billion, while repurchasing $4 billion of outstanding shares.”

“For the year, we are reaffirming guidance for all key metrics. We continue to expect sales to be in the range of $65 billion to $66 billion with segment operating margin at 11.2% at the midpoint.”

“We will refine the impact as the year progresses, but do not expect the change to Aero’s 2023 sales and profit ranges that we had previously communicated in January as we maintain our production cost throughput profile for the year.”

“For the year, we expect F-35 deliveries to be lower than previously anticipated due to software maturation with the Tech Refresh 3 program and hardware delivery timing.”

“Our cash deployment plan is on track, which we expect to accelerate throughout the year.”

“First delivery is expected by the mid-2020s.”

“However, we do expect a fraction of total expected 2023 deliveries to be impacted later this year, due to both software maturation related to Technology Refresh 3 or TR3 and hardware delivery timing.”

“When it comes to GMLRS, which is the HIMARS munition, the original capacity last year was 10,000. We're taking that to 14,000 by 2026.”

“Our 2022 capacity was about 2,000 a year and by 2026, we'll have 3,500 plus, and ultimately, we're going to get to 4,000.”

“So for PAC-3 capacity 2022 is 450 and we're planning to make the investments and working with government to coordinate with us on this to 550 by 2026.”

“Rich, good question on international. For us over the next five years or so, we expect international to be a significant contributor to our growth. It's embedded amongst each of our four pillars. But when you strip out international alone, you're talking high-single-digit growth there.”

“Overall, over the next four to five years, we will see profit grow at MFC.”

“Just going back to the MFC in terms of the outlook, we're going to be pressured on margins, probably for the next four to five years and predominantly from this program.”

“We will continue to see some growth on some of these other programs. I will acknowledge there probably is some upside to their sales, but it's not $1 billion that you're nearly talking anywhere between $100 million to $200 million of probably upside to where we are today.”

“I'm confident they'll be able to do that in the future as well, but it will take a few years to get there.”

“So as I mentioned in my prepared remarks, we've got about -- we had orders of about $1.5 billion. We'll start delivering on some of that in 2023, and that will carry over into 2024.”

“To answer the question on add-ons, that is -- will be -- that will occur but not necessarily in 2023... What I would expect -- and this is included in our sustainment revenue growth projections, we'll see the retrofits on the existing fleet over time. And that will probably start beginning maybe sometime in 2024 and beyond, and its part of our mid-single-digit sustainment growth on the F-35.”

“In the short term, really, I would say, over the next three years or so, our objective will be just to hold the margins where they are because some of these pressures that we see on these new programs, particularly at MFC, when you've got a 90 basis point reduction in one year from -- in one BA, that's a lot to really overcome.”

“Jim mentioned FARA. That's probably a 2025 decision as well.”

“In NGI, we would expect to down-select around 2025.”

“What I will say is that we do have the benefit of some offsetting mix with the upside that we're seeing in this business... Those will come with more solid margins will help mitigate the reduction that we're seeing on these new programs. But there will be some pressure there that we have to deal with.”

“We've got some new program awards, particularly in classified, that are going to put margin pressure not just next year but a few years beyond that as well.”

“We'll see that decline a little bit more over the next few years as well. And so it will come down in the range, I think, around $1.5 billion, $1.6 billion over the next few years.”

“Yes. I mean -- so for cash this year, as we mentioned, that will decline this year. I said about $100 million. Specifically, the CAS element will decline by about -- the recoveries by about $75 million.”

“I think next year, as we think about the margin, yes, there's a little bit of a headwind there. I think mix does play a part in it as well as right now, we're planning a little bit lower favourable profit adjustments.”

“And '23 versus '22 is pretty much flat deliveries.”

“At RMS, CH-53 will double deliveries in '24 versus '23.”

“And so we're going to see gradual improvement in supply chain as well as our internal operations in '23 with stronger growth in 2024.”

“So as those -- both of those normalize in 2023 going into 2024, they will no longer be headwinds, which will continue to allow for growth in Aeronautics, particularly in the F-35 sustainment and on F-16 production.”

“Similarly, on the F-16, we're going to see continued growth in production to roll out our backlog, but we are seeing a reduction in modernization and sustainment programs on the F-16.”

“On the F-35, we continue to expect mid-single-digit growth in sustainment on the program.”

“We currently expect $2.1 billion of FAS/CAS income in 2023.”

“Speaking to the timing of sales this year, we expect the first quarter to be our lowest quarter of the year, ramping up quarter-over-quarter as we did in 2022.”

“We also continue to expect a return to sustained top line growth in 2024 and beyond as headwinds diminish in our program mix, the supply chain continues to recover and our signature programs grow.”

“We continue to expect 2023 sales about the same level as we discussed back in October.”

“As we look ahead, demand for Lockheed Martin platforms and systems is strong in the United States and abroad.”

“Sikorsky remains one of two competitors for the other component of the Future Vertical Lift initiative that's called the Future Attack Reconnaissance Aircraft, or FARA, which is currently expected to be awarded in 2025.”

“We continue to expect growth in classified that will outpace the rest of the portfolio over the next several years.”

“Deliveries are expected to begin for Australia this year.”

“We view this funding outcome as positive for the future, and our current expectation is that growth will materialize over the longer term, starting in 2024.”

“We expect to complete our remaining repurchase authorization of $10 billion over the next few years, consistent with our focus to deliver free cash flow per share growth to you, the investor.”

“And for 2023, we expect to complete the detailed design and implementation road maps that go with it, and then we'll transition to the system build and configuration phase over the next couple of years.”

“Where we see potential increases to where we were at baseline before really is in MFC. Over the next five years, we've got revenue potential. It's around $6 billion.”

“This program remains a focused competition for Lockheed Martin with the first NGI forecast for delivery in 2027.”

“We do have a large missile -- air and missile defense program -- international program. It's an important program for us this year. And so it's probably back half of the year type of decision.”

“There are a few countries that have been announced there that we're eagerly awaiting contract finalization, hopefully this year, with Jordan and Bulgaria.”

“We also see probably some Black Hawk growth in '24 as well.”

“And that would more than offset lost revenue associated with FLRAA should that decision hold. And so net-net, we see that there could be some upside over the next five years.”

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

“And again, our free cash flow, again, with the share repurchase program will get better than what we were saying a year ago.”

“We fully expect, as Jim mentioned, to participate in this industry upside. You're going to see that in the orders in the backlog.”

“Well, on the second question, George, we did have a profit adjustment on the F-35 program and the production program there. So, we will see moving forward a higher recurring margin rate there.”

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

“So the FAS/CAS adjustment all in, we're expecting to come down by about $125 million.”

“On the CAS side, we expect the CAS cost to come down as well by about $75 million.”

“As far as pension's involved, we do expect the FAS income to come down. You're talking in the range of say $50 million.”

“We talked on this call today that there are some upside opportunities to that baseline. Missiles and Fire Control is certainly a prime opportunity.”