Lockheed Martin Corporation

Good day and welcome, everyone, to the Lockheed Martin Third Quarter 2024 Earnings Results Conference Call. Today's call is being recorded. If you would like to ask a question, please press 1, then 0. We ask that you please limit yourself to one question and re-queue for a follow-up, time permitting. At this time, for opening remarks and introductions, I would like to turn the call over to Maria Richard-Own, Vice President, Treasurer, and Investor Relations. Please go ahead.

Thank you, Steve, and good morning. I'd like to welcome everyone to our third quarter 2024 earnings conference call. Joining me today on the call are Jim Taklett, our Chairman, President, and Chief Executive Officer, and Jay Malave, our Chief Financial Officer. Statements made in today's call that are not historical facts 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've 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 chart. With that, I'll turn the call over to Jim.

Thanks, Maria. Good morning, everyone, and thank you for joining us on our third quarter 2024 earnings call. The demand for Lockheed Martin systems and services remains robust across all four of our business areas. We ended Q3 with record backlog of more than $165 billion, reflecting a book-to-bill ratio of 1.3 in the quarter. Precision and air defense munitions drove the increase, including large orders for Javelin, guided multiple launch rockets, and joint air-to-surface standoff and long-range anti-ship missiles. Compared with last year's third quarter, sales increased, and segment operating margins expanded 20 points to 10.9, led by missiles and fire control, reflecting increased production volume. Free cash flow was $2.1 billion in the quarter, as we continue to implement working capital efficiencies and optimization. High confidence in our future cash generation prospects supported our board's recent decision to raise the quarterly dividend by 5% to $3.30, the 22nd consecutive year of increases, and to extend our share of purchase authorization. Turning to the F-35, we delivered 48 F-35 aircraft in the quarter, We expect to deliver 90 to 110 aircraft in 2024 and the remaining balance of the lot 15 to 17 aircraft thereafter. In addition, TR-3 flight testing continues with 95% of combat capabilities validated and additional capabilities progressing. With over 1,040 aircraft delivered and growing, the F-35 fleet has become an essential component of the collective security of the U.S. and our global allies. For example, by the 2030s, over 600 F-35s will be in operation across more than 10 European nations. And in July, Greece announced that it will be the 19th nation to fly the F-35 and will acquire 20 aircraft. Plus, the rollout of the initial F-35 for Poland in August marked a significant milestone in our 20-plus year partnership with that country. The F-35's superior sensors, stealth, and data sharing capabilities are setting new standards for interoperability and joint operations with our allies, serving as the cornerstone for NATO's deterrence and defense posture. To further augment the capabilities of the F-35 and our other major platforms, we are investing heavily in autonomy and AI, as well as other enabling digital technologies. As an example, our Lockheed Martin AI Center and our RMS business area conducted realistic teaming scenarios with uncrewed aerial systems or drones and uncrewed ground vehicles at the U.S. Army in their recent experimental demonstration event. The successful demonstrations exhibited our abilities for using AI by launching an autonomous drone to provide guidance and navigation instructions to a ground-based robot to help it navigate a dangerous urban environment and enable greater safety for our soldiers than any current approaches can do. The rapid integration of digital technologies and capabilities is one element of our 21st century security strategy. Another example of this in the third quarter was Lockheed Martin's Skunk Works team, partnered with the U.S. Air Force Test Pilot School to conduct full-scale live flight tests of an adaptive technology that makes real-time adjustments to flight control algorithms, resulting in substantial time and cost savings. And we do these kind of tech insertions on real, scalable combat platforms. Those that, when implemented en masse, can have theater-level effects on combat capability and thereby deterrence from great power-arm conflict. The second element of 21st century security is designing resilience and anti-fragility into the defense industrial base. To this end, we signed a teaming agreement with our partner General Dynamics in the third quarter for the production of solid rocket motors. The initial work will focus on producing SRMs for the Gimler's rocket and will start in 2025 at GED's facility in Camden, Arkansas. This third source of solid rocket motors will enable us to move more quickly to ramp production for critical defense capabilities and strengthen the defense supply chain. The third element of 21st century security is the implementation of a global and regional approach to production and sustainment with our allies and partners. We have expanded international collaborations to enable indigenous military capability development in countries including Australia, Germany, Poland, and India. I recently had the opportunity to discuss the expansion of Lockheed Martin's sustainment and production operations in India with Prime Minister Modi in July. including growing the capacity and the capabilities of our joint ventures with Tata that already manufactures C-130J empanages, F-16 wings, and helicopter cabins in Hyderabad. Turning to the U.S. defense budget, we are currently in a continuing resolution that funds U.S. government operations through December 20 of 2024. For our part, our teammates across all of Lockheed Martin will thereby be able to continue to work diligently to deliver on our customer commitments. We'll also be dedicated to delivering strong financial performance through the remaining months of 2024 and to carry that momentum into the coming year as well. So now I'll turn it over to Jay.