Lockheed Martin Corporation

Good day and welcome everyone to the Lockheed Martin second quarter 2026 earning results conference call. Today's call is being recorded. If you would like to ask a question, please press star then one now. At this time for opening remarks and introductions, I would like to turn the call over to Mark Kvasnak, Vice President, Investor Relations. Please go ahead.

Thank you, Sarah, and good morning. I'd like to welcome everyone to our second quarter and Evan Scott, our Chief Financial Officer. Statements made today that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Please see Lockheed Martin's 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 slides on our website today that we plan to address during the call to supplement our comments. These slides also include information regarding non-GAAP measures that may be used in today's call. Please access our website at at LockheedMartin.com and click on the investor relations link to view and follow the slides. And with that, I'll turn the call over to Jim.

Thanks, Mark. Good morning and thank you to everyone on the line for joining our second quarter 2026 earnings call. As you saw in our press release, Lockheed Martin's second quarter results were strong. Our backlog reached a new all-time high, now $230 billion. We generated nearly $3 billion in free cash flow. We accelerated our revenue growth and turned in higher earnings per share. 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. While these achievements stem from robust customer demand, they were enabled by strategic decisions we made well before this demand materialized. For the past several years, we've been increasing munitions capacity ahead of contracted demand. We've been pioneering comprehensive open architecture technology initiatives well before they became a standard practice. And we established a manufacturing footprint in allied countries prior to the rise of co-production requirements. By embedding our core 21st century security principles, rapid data-driven decision-making, resilient supply chains, and Interoperable AI-enabled systems, we ensured our solutions would be ready for the changing threat landscape that we see today. To deter armed conflict and prevail when it occurs, US and allied armed forces turn to the partners that already have combat-proven systems. Also critical is the ability to scale up production, deployment and sustainment worldwide. Those strengths of Lockheed Martin have contributed tremendously to this quarter's performance. As you can see this most clearly in second quarter contract activity. In late June, the Missile Defense Agency awarded a seven-year contract for $35 billion to quadruple production of THAAD interceptors, marking the next of the munitions frameworks to transition to a contract. Alongside THAAD, the Army awarded a Gimler's production contract at $3 billion, covering the current version and its newly developed successor. which will have twice the range from the same launcher. We also secured a high Mars award valued at up to $1.1 billion for the U.S. Army, Marine Corps, and up to five allied nations. Stepping back, these awards are less about any single program than about what they're building in aggregate. Together they strengthen the nation's production base, adding resilience along with more manufacturing capacity, more sources of supply, and greater surge capabilities. all at a time when these very attributes have become the strategic imperative for the country. And the quarter's success story was not about munitions alone. It spanned the full spectrum of our business with new awards and accomplishments achieved across the board. The US Space Force selected us as one of the awardees to develop space-based interceptor prototypes under Golden Dome with capability demonstration expected by 2028. We also signed a $2.3 billion radar contract supporting the growth projections we've been making related to our radar business. Following a series of successful flight tests, we continue to make progress on the critical hypersonic weapons program, conventional prompt strike. Cumulative contract modifications totaling $1.4 billion on this joint Army and Navy program will drive more rapid development and demonstration of this sea-based Hypersonic Strike Weapon Systems. We also announced the next generation glide body demonstration, which is a new hypersonic glide body that's more affordable, scalable, and flexible. Our team's operational execution hit its stride this quarter as we fulfilled key delivery and technical obligations throughout the portfolio. We resumed deliveries for the F-16 and increased output of C-130 aircraft. Two F-16s and seven C-130s were delivered to customers this quarter. We also delivered the second ship set of our SPY-7 radar equipment for Japan's new missile defense destroyers, on scheduled delivery for a program central to the key allies' homeland defense in Japan. In May, at White Sands Missile Range, the Quad Star Seeker completed its flight test as part of the Next Generation Short Range Interceptor Competition. validating some key risk reduction milestones for the Army Stinger replacement on a very compressed six-month schedule. Building on that success, in June we announced the advancement of the PRISM Increment 4 missile, which cleared a critical technical gate and confirmed the system's extended range while still preserving capability and compatibility with existing HIMARS. While we execute in our engineering centers and factories, we're also innovating with a lot of purpose and speed. We're not waiting on orders or contracts to close evident mission gaps for our military services and those of our allies. In early June at Yuma Proving Ground, our Sanctum counter UAS solution, anti-drone system, utilizing our grizzly containerized launcher, went from concept to successful live fire testing in under 45 days. Built not by inventing something brand new, but by connecting what we already had. a combat proven battle manager, radar, a launcher, and JAGM missiles, the successor to the Hellfire, operating as one integrated system for a brand new mission. Four elements, three of them ours, and one from a partner that we invested in through Lockheed Martin Ventures. That same logic, building on established battle-tested solutions instead of starting from scratch, guides the Navy's decision to integrate the PAC-3 missile into the Aegis Combat System. This move adds a new intercept capability to surface ships for the Navy. Though the PAC-3 was originally designed for air defense with a different radar and launch architecture, the Navy's acquisition taps our truly unique integration expertise. Our engineers were able to merge the missile's inherent guidance mechanism with our Aegis fire control system into a single fleet fieldable solution. This will enable the U.S. Navy to deploy this new capability on its existing ships relatively rapidly. We've demonstrated this system's integration discipline across our new Sanctum counter UAS system, and every missile Aegis has fielded for more than 40 years. We are also extending this forward-thinking approach to partnering with some of America's greatest manufacturing leaders, as evidenced by our recent collaboration with General Motors Defense. Our joint objective with GM is to explore applying the automotive industry's high-rate manufacturing and supply chain expertise to defense production. We hope this effort will provide us more access to the speed and scale of America's commercial industrial base to help significantly accelerate output as demand grows. Now, behind every one of our achievements this quarter is a steady long-term commitment to the physical backbone of the company, new factories, advanced automation, and state-of-the-art tooling and robotics. We enhanced that infrastructure with strategic partnerships among the nation's leading technology and manufacturing firms, and we now embed artificial intelligence capabilities directly into our production lines. AI-driven analytics optimize equipment performance, for example. We have predictive maintenance algorithms that reduce our downtime and machine learning-guided quality checks that streamline the inspection process. Also, as our design and manufacturing systems evolve, we are deliberately growing and diversifying our access to capital investment and critical workforce skills through international partners via expanded co-production and regional sustainment programs. These efforts have the benefit of placing manufacturing, overhaul, and repair capabilities where U.S. forces are deployed overseas and where our allied forces operate. Overall, our approach is financially disciplined, while perhaps less risk averse than may have historically been the case. Each co-production initiative is a purposeful investment with a clear view of the expected returns that each will generate once contracts materialize. Our strategy to make our production operations more resilient and scalable, integrate the latest 21st century technologies into existing and new systems, and expand our international production is underpinned by a very strong balance sheet. Our robust cash generation and access to capital supported by our strong credit rating can fuel billions of dollars of planned investment and a portfolio of new and expanding facilities across the United States and beyond. This quarter alone, we held the opening of a missile assembly building in Cortland, Alabama, the future home of the Next Generation Interceptor Program, and a critical hub for integrated air and defense work on programs such as THAAD. In May, we broke ground on a new munitions production center in Troy, Alabama, adding 87,000 square feet of production space to support THAAD interceptors and future NGI work. We also continue to make progress on our new production facility in Titusville, Florida, which will support critical development of the Trident II missile. Our pace of discipline investment for growth has continued since the end of the quarter. In the span of a few weeks, we signed an agreement to acquire Ultramaritime. This acquisition will enhance our advanced undersea sensing and autonomous sea drone capabilities, a domain where there is growing demand. At the NATO summit, we signed a memorandum of understanding with Rheinmetall toward the first European center of excellence for ATACMS production. And we welcome the commitment of the United States, Germany, the Netherlands, to explore a dedicated PAC-3 missile facility in Europe for maintenance, putting allied capability closer to allied needs. Last month, Secretary Hegseth highlighted the success of the first milestone test of Golden Dome for America, noting that Lockheed Martin's directed energy laser weapon had cued, targeted, and eliminated a full spectrum of incoming threats, which was a true milestone achievement. Just two weeks later, the U.S. government awarded us a joint laser weapon system contract to develop a containerized 500 kilowatt laser. This will be the highest powered laser ever packaged in a transportable container and is a cornerstone of the next generation cruise missile and drone defense architecture. This win didn't happen overnight. It builds on our longstanding laser weapons experience and years of investment in these technologies. confirming its readiness for actual field deployment. Lastly, just a few days ago, we secured a $1.6 billion F-35 spare parts award, the largest such contract in F-35 history, reinforcing the Department of War's heightened focus on keeping the world's premier fighter fleet operational. Our upfront investment in spare parts and consumables has now been translated into immediate inventory that can be shipped to customers the moment their need arises. The quarter's announcements are driven by three deliberate actions. First, we are investing at home, expanding manufacturing capacity to meet today's demand cycle. Second, we are partnering with allies, positioning the capabilities where they're needed the most. And third, we are advancing technology from directed energy and autonomy to integrated cross-domain systems. The result of these efforts is a deterrence posture Thank you, Jim. Good morning, everyone.