16 annotations
So look, there's a near-term and a long-term approach that we're taking to government contracting with industry. And the near-term piece of it is a lot of what Jay just described, really matching the pricing and the risk profile within our company, I'll say.
Now I don't know what other companies doing how they're making their decisions. But what we've recognized and I've said to our senior customer base, look, we're in a monopsony environment here, meaning there's a single buyer for the most part, for almost everything that we make or Boeing Defense makes or gel Dynamics makes. And I guess, the government's credit in a way, they've been taking advantage of that monopsony power, if you will, over the industry. And what's happened as a result of that over the last number of years or even decades is you have lots of programs which are over cost, cost overruns, right, whether fixed price or cost plus and you have scheduled delays because what that monopsony environment can do is give so much power to the buyer that some of the competitors feel that there are must-win programs for them that they will take tremendous risk on cost and pricing and tremendous cost on the ability to technically deliver these capabilities.
So when you multiply those 2 risks together, you get a lot of cost overruns, a lot of schedule delays, programs reviewed by Congress, et cetera.
So I've been advocating in the near term and certainly implementing with our company, we don't have any must-win programs at Lockheed Martin anymore. If we have a good business opportunity with a balanced price risk profile, we will bid. If not, we will not bid. If we hit our limit parameters, we won't go beyond those, a competitor may win, so be it.
And so that's our near-term approach to this. The longer-term approach is in addition to delivering products that we and our cohorts in the traditional defense industry do so well, we need to start migrating towards delivering capabilities right? So capability would include either products that are already fielded and/or new products but especially digital technologies, which is why we are collaborating with so much effort with commercial tech companies large and small because we can value price capabilities, right? If we sell products, and that's all we do as an industry, we are kind of locked into the far, the federal acquisition regulation as it is written today, which means even a fixed price contract, you've got to provide all your cost information, right? And you have to do it often every year. even with a multiyear fixed price, there can be adjustments.
So we want to move as briskly as we can as an industry with our commercial partners to their kind of pricing, which is value-based subscription. That's going to take time. It's going to take changes in government. It's going to probably take literally act of Congress to do it. But that will be the thing that will make our industry healthier on one hand, the traditional defense and aerospace industry, but it will also invite in the commercial tech companies who are basically, if you look at the broad scope investing 10x what we are in R&D. And we want to bring a lot of that 10x R&D and all that talent into the defense department as part of their supply chain, but it's really tough under the bar for those companies to put time and attention and effort into DoD.
defense industry commentary
Transcript
2023 Q4
9 Feb 24
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.
f35
Transcript
2023 Q1
21 Nov 23
We continue to expect deliveries of the F-35 to ramp to 156 by 2025. Despite the temporary pause in flight operations and corresponding suspension of engine deliveries that began in December and resulted in the delivery of just 141 F-35s in 2022, seven shy of our expectation of 148 before the engine issue was discovered.
f35 deliveries
Transcript
2022 Q4
17 Nov 23
Given the current status of the 2024 U.S. Defense budget, global geopolitical tensions and the macroeconomic environment, we will provide our expectations for our 2024 financial outlook during our full year 2023 earnings call in January.
not giving guidance until Jan
Transcript
2023 Q3
17 Nov 23
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
classidied program
Transcript
2023 Q3
18 Oct 23
ut I think one of the issues that kind of you mentioned has been the classified missile program at MFC, where you have some LRIP options coming up. Could you maybe give us some color in terms of the status of that and how that impacts -- could impact next year? And any other items we should be watchful of that might exert gravity on margins?
Jesus Malave
Sure, Cai. Thanks.
So yes, I mean, that's the question we've talked about. It's been a headwind. It's something that we've talked about for the upcoming number of years, including next year. And in fact, we are seeing some of the headwind this year, and it really -- it's dependent upon an analysis really the timing of recognition of these losses.
And there are certain things that need to be met from a performance standpoint on the program. And then it becomes an assessment on the probability of an option being exercised.
And so there's just variability in that timing. It could be as early as, frankly, as this quarter, or into next quarter. 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.
So hopefully, that provides a little bit of color on the impact of that program. Is that as far as any others, look, we -- if you look at this year, we had lower profit adjustments this year.
We expect there to be in the low 20s in 2023. 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.
classified missile pr0gram art mfc
Transcript
2023 Q3
18 Oct 23
Jay, a quick clarification and then a question for Jim. The clarification on the margins for next year, 25 to 50 basis points of risk, I guess, is what you're seeing on the MFC. Should we anticipate that there's a way around that? Or is that the base case? And then, Jim, in the press release, you talked about digital services revenue over time. And I'm just curious, maybe you could touch on your vision of what digital services revenue is today and where you want to take it over the next several years?
mfc
Transcript
2023 Q3
18 Oct 23
So just wanted to ask Jim and Jay, you're a pretty confident management team just given your big backlog, $150 billion.
You're returning 150% to shareholders, which is a big number.
So you've talked about low single-digit growth and 11% margins for some time.
So I just kind of wanted to know what's changed given the backdrop is seemingly better, is it just a budget uncertainty? Is it supply chain? Is it F-35? Maybe if you can just comment on that.
Jesus Malave
Well, not much has really changed, to be honest, we talked about low single digits for a while now. We -- I talked about that in my prepared remarks.
On the margins, underlying margin is generally flattish because we could be in a situation next year where we have multiple lots of the classified program, that could cause some variability.
But that doesn't fundamentally alter what we've been really talking about. Same thing with free cash flow. We've been targeting mid-single-digit free cash flow per share growth. And we still see a path there. We know there are some headwinds, whether it's pension and the like, but we still believe that, that we have a line of sight to be able to do that. And that's what we're going to be working through on a year-by-year basis and starting with 2024 over the next couple of months. We'll work through solidify our plans, and we'll present them formally to you in January.
lsd growth , and taegetting msd fcf growth
Transcript
2023 Q3
18 Oct 23
MSC has built a strong backlog, and we continue to see strong demand for our missiles and munitions with allied nations seeking to improve the security posture amidst today's complex threat environment. This backlog provides a foundation for growth over the coming years across several of our product lines, including PAC-3, GMLRS, HIMARS, Javelin and JASSM and LRASM.
stromg demand fir missiles and fire control
Transcript
2023 Q3
18 Oct 23
Third quarter sales at Aero decreased 5% driven by lower volume on F-35, partially offset by higher volume at Skunk Works. F-35 production was down due to the previously mentioned Lot 15-17 sales catch up in the third quarter of 2022, and an overall more linear throughput this year.
lower volume on f35
Transcript
2023 Q3
18 Oct 23
urning to the F-35 program. We delivered 30 F-35 aircraft in the third quarter, bringing the year-to-date total to 80 jets. 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 are producing F-35s at a rate of [ $156 billion ] per year, and expect to continue at that pace while simultaneously working to finalize TR-3 software development testing.
F35 deliveries (156 per year rate) on track for 2023
Transcript
2023 Q3
18 Oct 23
Backlog reached a record level of $158 billion, up $8 billion from year-end resulting from a book-to-bill of $1.7 in the quarter.
orders backlog data
Transcript
2023 Q2
5 Oct 23
Our current view is we expected to deliver 100 to 120 F-35 aircraft in 2023.
Importantly, there is no change to our longer term delivery outlook of 156 aircraft in 2025 in the foreseeable future, and the supply chain and production system continues to execute at a rate to support these future delivery targets.
f35 targets
Transcript
2023 Q2
5 Oct 23
nationalization of the Atomic Weapons Establishment program.
.
Transcript
2022 Q1
21 Oct 22
the Swiss government signed a letter of offer and acceptance for the procurement of 36 F-35As.
.
Transcript
2022 Q3
19 Oct 22
demand for a wide range of our products and services remain strong.
(No comment added)
Transcript
2022 Q3
19 Oct 22
- Prev
- 1
- Next